Case Study: Allied Company – CVP Analysis for Pricing and Advertising
Introduction
Allied Company faced a crucial decision: whether to reduce selling prices and increase advertising expenses. This case study explores the CVP analysis that guided their decision-making process.
Client Overview
Allied Company aimed to boost annual sales by adjusting pricing and advertising strategies.
Challenge
The challenge was to assess whether reducing the selling price and increasing advertising expenses would result in a profitable outcome.
Solution
Our team performed a CVP analysis, uncovering:
- Potential Loss: A projected loss of Rs. 34,000 if prices were reduced.
Results
The analysis indicated that reducing prices would not be financially viable given the additional advertising costs, helping Allied Company make a more informed decision.