When

300 series
Patriculars Produces Not Produced
Labor 349 0 Total VC 773
Raw Material 404 0 Total Fixed 598
Power 15 0
Repairs 5 0
Rent 95 95
OFC 56 56
Total 924 151

Selling Expense 239 239

Gen. Admin 90 90
Depriciation 186 186
Interest 27 27
Total Cost 1466 693

Sales 1355 0 % Increase in losses

Profit (Loss) -111 -693 524%
111 693
 100 Series 200 Series 300 Series
Selling Price 2.42 2.52 2.7
Total Sales 996859
Variable Costs

Labor 0.61 0.59 0.7

Raw Material 0.63 0.75 0.81
Power 0.01 0.02 0.03
Repairs 0.01 0.01 0.01
Total VC 1.26 1.37 1.55
Total Contribution 2494000 1174000 1145000

Fixed Costs
Rent 88000 109000 95000
Depriciation 264000 269000 186000
OFC 65000 76000 56000
Selling Expense 426000 317000 239000
Gen. Admin 161000 90000 90000
Interest 25000 28000 27000
Allocated Fixed Cost 1029000 889000 693000

Contribution Margin 1.16 1.15 1.15

Profit per unit sales 0.128 -0.136 -0.232

Berkshire should not reduce the prices in any case
Whether to lower price
This will lead to increase in volume

Selling Price 2.42 2.25

Unit sales 750000 1000000
Total sales 1815000 2250000

Labor 0.61 0.61

raw material 0.63 0.63
power 0.01 0.01
repairs 0.01 0.01
total 1.26 1.26

Variable cost 945000 1260000

Contribution 870000 990000

Selling Exp 426000 426000

General Admin 161000 161000
Rent 88000 88000
Other Factory costs 65000 65000
Depriciation 264000 264000
Interest 25000 25000
Total 1029000 1029000

Fixed Cost per unit Sales(100pcs)

Total 1.372 1.029

Total Cost per unit sales 2.632 2.289

Profit -0.212 -0.039

Thus, price reduction is good