Question

Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $33 each, and her variable costs are $23 per basket. She incurs $13,100 in fixed costs each year.

Last year, Marissa sold 3,980 baskets, and she believes that demand this year will be stable at 3,980 baskets. The following are the actions Marissa could take if she wants to earn $28,700 in operating income by selling only 3,980 baskets. Consider each action independently. (Round per unit answers to 2 decimal places, e.g. 52.75 and fixed cost to 0 decimal places, e.g. 5,275.)

1.		Raise selling price per unit to		$enter a dollar amount rounded to 2 decimal places Cost–volume–profit analysis in gift creation and delivery businessenter a dollar amount rounded to 2 decimal placesCost–volume–profit analysis in gift creation and delivery businessenter a dollar amount rounded to 2 decimal places
2.		Reduce variable costs per unit to		$Enter a dollar amount rounded to 2 decimal places Cost–volume–profit analysis in gift creation and delivery businessEnter a dollar amount rounded to 2 decimal placesCost–volume–profit analysis in gift creation and delivery businessEnter a dollar amount rounded to 2 decimal places
3.		Reduce fixed costs to		$enter a dollar amount rounded to 0 decimal places Cost–volume–profit analysis in gift creation and delivery businessenter a dollar amount rounded to 0 decimal placesCost–volume–profit analysis in gift creation and delivery businessenter a dollar amount rounded to 0 decimal places

Answer 1

1. suppose we are increasing in selling price per unit is 1.5% than our new selling price is $ 33.50

sale (3980*33.50)	133330
less variable cost (3980*23)	91540
contribution	41800
less fixed cost	13100
profit is	28700

2. suppose reduction in variable cost :( in $) reduction in variable cost is $0.51

sales (3980*33)	131340
less : variable cost (3980* 22.49)	89540
contribution	41800
less : fixed cost	13100
profit	28700

3. reduction in fixed cost :( in $)

sales 3980*33	131340
less: variable cost 3980*23	91540
contribution	39800
fixed cost	11100
profit	28700