I have a doubt, shouldn't we consider that :
As 1/2 of sales are sold at VC then those (120,000/2=60,000) sales would lead to zero CM.
Therefore, when they say remaining sales (i.e. 60,000 which are sold at 70% VC and there is 30% CM) will decrease by 20%. Hence, CM would reduce by 3,600 (20% of 18,000).
Therefore, CM Lost Vs. Relevant cost saved
3,600 Vs. 6,000 (15% of 40,000)
Hence, -3600+6000=+2400, O/I would increase by $2,400.
However, They've taken CM Lost as 20% of whole sales/CM (i.e. 20% of 36,000) which is 7200.
hence, 7200 CM Lost vs. 6000 cost saved
Lead to (1,200) decrease in O/I that is the answer D according to question.
Please help me with this one...
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Shubham Sharma
Gurugram
India
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