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QUESTION 3 (10 marks) Plastique Pty Ltd sells only one type of plastic...

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Accounting

QUESTION 3 (10 marks)

Plastique Pty Ltd sells only one type of plastic container for multi-purpose packaging. Data relating to the product for 2019 are as follows:

Number of Units sold

45 000

Selling Price per unit

$26

Variable Manufacturing Cost per unit

$8

Variable Selling Cost per unit

$4.50

Annual Fixed Non-Manufacturing Cost

$80 000

Annual Fixed Manufacturing Cost

$265 600

The CEO of Plastique currently is under pressure from the shareholders to increase profits to

$432 000 in 2020.

  1. If annual fixed costs manufacturing costs increased by $60,000 and the company can choose to increase the price by 10% or decrease variable manufacturing cost per unit by 25% to compensate the decrease in profits. Which decision would maximise the profit of the company? Assume the number of units sold are 45 000.

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