Answered: Wholesaler Retailer Consumer Rial Rial…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company is providing its product to the consumer through the wholesalers. The managing director of the company thinks that if the company starts selling through retailers or to the consumers directly, it can increase its sales, charge higher prices and make more profit. On the basis of the following information and consider variable cost is rial 2.50 per unit and fixed cost is rial 50000.

(a) Advise the managing director whether the company should change its channel of distribution or not (with calculation and Justification).
(b) Provide suggestions and recommendations on the basis of analysis.

Wholesaler
Retailer
Consumer
Rial
Rial
Sales Per Unit
3.60
Estimated Sales per year (units) 1, 00, 000
distribution 0.40
5.25
6.00
| 1, 20, 000
1, 80, 000
Selling
and
1.00
1.50
Overheads (Per Unit)

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