Question

PKRK sells chairs for $120 each and expects variable product costs to be $90 per unit with total fixed costs of $171,000. (Base Case) Determine the break-even sales units for the company. (worth 1/2 pt) a. b. What level of sales dollars should the company expect if PKRK wants to earn an operating profit of $85,000? (worth 1/2 pt) Starting from the base case scenario, the sales manager is convinced that sales would increase from 6,800 to 7,900 units if the company simply replaces $60,000 of fixed costs which is paid to the sales rep with a sales commission of $12 per unit sold. Should the company make the change? Prove/justify your answer. (worth 2 pts) c. Starting from the base case scenario, If PKRK wants to realize $100,000 in operating profit, what must be the minimum sales price, per unit, if they produce and sell 6,000 units and there is no change in variable cost per unit? (round to the nearest $0.10) (worth 2pts) d.

Answer 1

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