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Cullumber Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The...

Cullumber Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $40 throughout the country to loyal alumni of over 1,600 schools. Cullumber’s variable costs are 40% of sales; fixed costs are $120,000 per month.

Assume that variable costs increase to 45% of the current sales price and fixed costs increase by $12,000 per month. If Cullumber were to raise its sales price 12% to cover these new costs, but the number of blankets sold were to drop by 7%, what would be the new annual operating income? 116,000 blankets sold!

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Answer #1
New Annual Operating Income:
Annual Blankets sold 116000*(1-0.07) 107880
Unit Sale Price 40*1.12 44.8
Total Annual Sales 4833024
Less:Variable costs Sales * 45% 2174861
Less:Fixed costs (120000+12000)*12 1584000
Annual Operating Income 1074163
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