II Replacers of old CTV to new CTV Market Research further indicated that the

Ii replacers of old ctv to new ctv market research

This preview shows page 180 - 183 out of 203 pages.

II. Replacers of old CTV to new CTV. Market Research further indicated that the up graders found price of over Rs. 10000 for a new CTV to be high. This implied that enough demand existed for old CTV (sold at Rs. 5000). But PTPL could not participate in the exchange offers since it lacked financial strength to sustain the same. Hence, the company launched a campaign which let consumers to book new CTVs with contemporary features at Rs. 9995/- per set by handing over a demand draft in favour of the company with dealers in the areas. The dealers in turn, couriered these demand drafts to the company on the same day. Company promised to deliver the TV set after 45 days. Against the sale of 3000 CTVs and 5000 BTVs, currently enjoyed by the company, the company managed to book 18000 CTVs as prices dropped from Rs. 14000 per set to Rs. 10000 per set. The price reduction naturally had to be achieved through appropriate measures. Considering that the cost of capital to PTPL was 20 percent in 1998, this was a challenging task. One of the measures would be to reduce dealer margin from Rs. 2500 to Rs. 500 per set. As the sales volumes increased the company could get a reduction in the cost of components (Picture Tube, Cabinets etc) to the extent of Rs. 780/- per set. Further the factory over heads (per set) could drop by Rs. 350/- Using the above information, answer the following questions: Is it necessary for the company to sacrifice any amount from its own gross margin to achieve the targeted price of Rs. 9995/- per set? If yes, how much? If not, why not? Furnish suitable calculations. 11.Alpha Company Ltd. has a manufacturing capacity of 100000 units per year. At the current operating level of 50000 units per year its budgeted profit statement is as under? 180
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PROBLEMS FOR EXERCISE Sales Rs. 5000000 Costs Variable Rs. 2000000 Fixed Rs. 2000000 Rs. 4000000 Profit Rs. 1000000 Company has received an order for export of 40000 units over and above the current level of production. The special costs, which are associated with and incidental to the export order are: I. Special Packaging Rs. 200000 II. Documentation Rs. 100000 The management expects a profit of Rs. 100000 after tax from the export order. Find out the minimum selling price required to realize this profit. Tax may be assumed to be zero. 12.Associated Bearing Co. Ltd has a policy granting 60 days credit to its dealers. The current sales are Rs. 1.5 crores per year. The cost of capital to the company is estimated to be 12 percent per year. The variable costs are estimated to be 80 percent of sales value. The new marketing manager has estimated that the sales will increase by Rs. 1 crore. If the credit period to dealers is extended to 90 days, instead of 60 days at present. However, the bad debts are likely to be at rate of 1 percent of the additional sales. Do you think the management of the company should approve marketing manager’s proposal for increasing the credit period? 13.Parekh Marketing Company employs 300 sales persons who are supervised by 30 field officers in five branches having offices and godowns. Each of the branches is headed by a branch manager. The 181
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PROBLEMS FOR EXERCISE
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