Homework Answers
Current position
Selling price per unit = $90
Variable cost per unit = $45
Fixed costs = $83,000
Sales = 2,900 units
Profit = Sales - Variable cost - Fixed costs
= ( 2,900 x 90) - ( 2,900 x 45) - 83,000
= 261,000-130,500-83,000
= $47,500
Proposed Position
Selling price per unit = 90- 90 x 12%
= 90-10.80
= $79.20
sales = 2,900+2,900 x 12%
= 2,900+348
= 3,248 units
Profit = Sales - Variable cost - Fixed costs
= (3,248 x 79.20) - (3,248 x 45) - 83,000
= 257,242-146,160-83,000
= 28,082
Operating income will decreased by = Current position - ProposedPosition
= 47,500-28,082
= $19,418
Second option is correct option.
Kindly comment if you need further assistance. Thanks‼!
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