Priya Balaji 18 January 2020
A Ltd. manufactures a component X. The turnover for the current period amounts to Rs.6,00,000. The PV ratio being 25% and MOS being 20%. The manager feels on account of severe competition, the selling price is to be reduced to maintain the same volume for year 2. he intends to implement cost reduction programme for fixed costs resulting in considerable fixed cost savings to result in 20% pv ratio and 30% mos. even if the company wishes to shut down it would incur a minimum of 60,000 as fixed costs.
your manager requests you to present a comparitive statement between year 1 and 2. also the units to be sold if it doesn't want to shut down operations in year 2.