Question

Rundle Company produces a product that has a variable cost of $26 per unit and a...

Rundle Company produces a product that has a variable cost of $26 per unit and a sales price of $58 per unit. The company’s annual fixed costs total $660,000. It had net income of $260,000 in the previous year. In an effort to increase the company’s market share, management is considering lowering the selling price to $51 per unit.


Required

  1. If Rundle desires to maintain net income of $260,000, how many additional units must it sell to justify the price decline?

  2. Assume that in addition to lowering its selling price to $51, Rundle also desires to increase its net income by $80,000. Determine the number of units the company must sell to earn the desired income.

Variable cost per unit

Total variable cost

Total contribution margin

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Answer #1

a competation of additional sales - units must at bell to Gustify the price decline. Number of sales Qn consits before chanceRequired contribution = $2,60,000 + $80,000+ $ 6, 60,000 $ 10,00, 000 Let d be the number of balles on units 51 - 260 = $10,0

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