Example 2: ABC Ltd. has, over the past few years, has sales of Rs. 400...
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Example 2: ABC Ltd. has, over the past few years, has sales of Rs. 400 lakhs with 30% contribution. Last year's fixed cost was 45 lakhs. Company plans to venture into new contract service business and also in the process of introduction of a new product. 1. Proposal A: Value of 30 lakhs with variable cost 60%, fixed cost of . 4 lakhs. Proposal B: Value of 20 lakhs with variable cost 50%, fixed cost of 3 lakhs. 2. New Product: Expected sales per month 6 lakhs with 50% variable cost and fixed cost of 1.0 lakhs per month. 3. Optimistic Assumption: Offer for both contract A & B will mature and be executed next year and new product will be launched from 2nd quarter of next year. 4. Pessimistic Assumption: Only contract A will mature and be executed next year and new product will be launched from 4th quarter of next year and there will be rise in both variable and fixed cost by 10% without scope for rise in sales value. Prepare two budgets based on optimistic and pessimistic assumptions
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