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Scenario-1

From the below calculations, it can be concluded by that Tony should go for increasing its selling price rather than redecorating its premises. It can be observed that at current situation company is able to attend the break- even point at 300000 units. It means that above 300000 units sell, company will be attending to earn the profits. In present situation company is selling 400000 units which mean that above 100000 units company is earning profits. Company’s fixed cost will be increased in case the company is going for redecorating its premises. On the other hand, company’s break- even point will be increased to 370000 units. It depicts that if company is selling same units i.e. 400000 then in such a situation company is going to earn profits only of 30000 units. Thus, in this case company’s profits will be reduced. Tony should reject this proposal of redecorating its premises because it is reducing the profits.

 

 

References

Adusumilli, N., Davis, S. and Fromme, D., 2016. An economic evaluation of using surge valves in furrow irrigation of row crops in Louisiana: A net present value approach. Agricultural Water Management, 174, pp.61-65.
Almaktar, M., Abdul Rahman, H. and Hassan, M.Y., 2016. Economic Analysis Using Net Present Value and Payback Period: Case Study of a 9kWp Grid-Connected PV System at UTM, Johor Bahru Campus. In Applied Mechanics and Materials (Vol. 818, pp. 119-123). Trans Tech Publications.
Batkovskiy, A.M., Semenova, E.G., Trofimets, E.N., Trofimets, V.Y. and Fomina, A.V., 2017. Statistical simulation of the break-even point in the margin analysis of the company. Journal of Applied Economic Sciences, Romania: European Research Centre of Managerial Studies in Business Administration, 12(2), p.558.
Mariana, Z., 2018. THE CASH BUDGET–IS A SHORT-TERM FORECAST TOOL FOR THE FINANCIAL STATEMENTS OF ECONOMIC ENTITIES. Eco forum Journal, 7(2).

 

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