The following information relates to Mere’s budget for the year to 31 December 2012:,Fixed overheads are apportioned on the basis of direct labour hours.,The directors are worried about the loss that product M is budgeted to make and various suggestions have been made to counteract the loss, viz.:,Stop selling product M;,Increase M’s selling price by 20 per cent;,Reduce M’s selling price by 10 per cent;,Reduce its costs by purchasing a new machine costing £350,000, thereby decreasing the direct labour cost by £100,000 (the machine would have a life of five years; its residual value would be nil).,Required:,Evaluate each of theseproposals.
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