Question

Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 71,000 units for $60 per unit. The variable production costs are $35, and fixed costs amount to $810,000. Production engineers have advised management that they expect unit labor costs to rise by 15 percent and unit materials costs to rise by 5 percent in the coming year. Of the $35 variable costs, 45 percent are from labor and 25 percent are from materials. Variable overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than 10 percent. It is also expected that fixed costs will rise by 7 percent as a result of increased taxes and other miscellaneous fixed charges.

The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 8 percent during the year.

Required:

a. Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.)

volume in units:

sales:

b. Compute the volume of sales and the dollar sales level necessary to provide the 8 percent increase in profits, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.)

volume in units:

sales:

c. If the volume of sales were to remain at 71,000 units, what price increase would be required to attain the 8 percent increase in profits? Calculate the new price. (Round your answer to 2 decimal places.)

new price:

0 0
Add a comment Improve this question Transcribed image text
Answer #1

ANSWER

Given that

sale units = 71,000

sale price per unit = 60

varible production cost per unit = 35

fixed cost = 810,000 dollars

Therefore

Somputatonnn Pres mount () SaleS 4,260,000 less. Varible Cost [71000 unik@$. 35 Per unit.] ,485 ,000) Contribultion 1,115000 less- Fixcd cost (310,000) Profit 9,5,000 QUeStion a Computation of the olume f unit and dollar Sales evel Lassuming the maximum priCe incYcase is implemented Lie have formula fordesired quanhty of Sale s Desired quantity of Sales- Fixed CoSf + Desired PYoFit Contribohon aigin per Unit Herc Fixed cost 810,000+1810,000 K‰。 = 1, 0o5G,700 = 866,700Desired Proft - 65000 given that -o maintain the Presen Pee in the question contribution magin Per unit - Sale per unit - varNeuly increased Varible Cost cqato labour cost : 串15.75+15. ·4(8.1125 material (ost f 8.15 +5% - 9.1875 over head Cost : t(0.5 + 20% : tp.6 Total varible Cost 39 There fove Contibution morgin Per Unit G6311 26 → Desved quantity of Saks GG,100 G5,000 26. 1,80 unit Theve foe to maintain Pesent pofit level YO To 80 unts be Sold dollar sales (evel 70,180 x 6G 4,631,880Computatio o Volumeol Sales ond dollaY level atncrin prolits Cassuming the maximum pri(c increosc lm plernented Desive qUantThere-foreie have o Sel 13,138 units to mainlain prot leve increaSe dollar Sales level 3,138 6G ,827, 1o8 incrase im plemantkd Desired Sales level Cin dollars Fixed Cost + DeSircd profit Profit volome Ya-tio fixed cost二4810,000 Desired profit 3юч, 2 200 (fvom question b ) ofit Volume YatioContibution pev unit X lo o Sellinj Pice perunit Con ti bution per umit- 60 - 135 : $25 60 41.67There fore Desire Sales 810, 000 tl.o Ч 2, 200 $4,445, 280 Uanlity ooo unit There fore sale Price per unit4,445280 TheYEfore New Selling Pric : $ς2.Gl Pricーキí2.GI

Add a comment
Know the answer?
Add Answer to:
Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 79,000 units for $30 per unit. The variable production costs are $15, and fixed costs amount to $890,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year. Of the $15 variable costs, 40 percent are from labor and 20 percent are from materials....

  • Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 63,000 units for $45 per unit. The variable production costs are $30, and fixed costs amount to $730,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 10 percent in the coming year. Of the $30 variable costs, 50 percent are from labor and 30 percent are from materials....

  • Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 61,000 units $35 per unit. The variable production costs are $20, and fixed costs amount to $710,000. Production engineers have advised management that they expect unit labor costs to rise by 15 percent and unit materials costs to rise by 10 percent in the coming year the $20 variable costs, 40 percent are from labor and 20 percent are from materials. Variable overhead...

  • Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 75,000 units for $45 per unit. The variable production costs are $25, and fixed costs amount to $850,000. Production engineers have advised management that they expect unit labor costs to rise by 15 percent and unit materials costs to rise by 10 percent in the coming year. Of the $25 variable costs, 40 percent are from labor and 30 percent are from materials....

  • Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 77,000 units for $55 per unit. The variable production costs are $36, and fixed costs amount to $870,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year. Of the $36 variable costs, 50 percent are from labor and 25 percent are from materials....

  • Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 77,000 units for $55 per unit. The variable production costs are $36, and fixed costs amount to $870,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year. Of the $36 variable costs, 50 percent are from labor and 25 percent are from materials....

  • Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 65,000 units for $30 per unit. The variable production costs are $16, and fixed costs amount to $750,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 10 percent in the coming year. Of the $16 variable costs, 45 percent are from labor and 20 percent are from materials....

  • argentina partners is concerned about the possible effects of inflation on its operations. Saved Help Save...

    argentina partners is concerned about the possible effects of inflation on its operations. Saved Help Save FINICIJU Piyu UV nuvy BIS IURCE Inryca Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 67.000 units for $40 per unit. The variable production costs are $21, and fixed costs amount to $770,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise...

  • Argentina Partners is concerned about the possible effects of inflation on its operations. Saved Help Save...

    Argentina Partners is concerned about the possible effects of inflation on its operations. Saved Help Save Required: a. Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. b. Compute the volume of sales and the dollar sales level necessary to provide the 7 percent increase in profits, assuming that the maximum price increase is implemented. C. If the volume of sales were to remain...

  • Check my work 7 1.11 Argentina Partners is concerned about the possible effects of inflation on...

    Check my work 7 1.11 Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 74,000 units for $40 per unit. The variable production costs are $17, and fixed costs amount to $840,000. Production engineers have advised management that they expect unit labor costs to rise by 15 percent and unit materials costs to rise by 10 percent in the coming year. Of the $17 variable costs, 50 percent are from labor and...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT