Question

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Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors. The company has collected the following price and cost characteristics.

Sales price	$	19	per unit
Variable costs		3	per unit
Fixed costs		50,000	per month

Suppose that fixed costs for the year are 10 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much?

Answer 1

Ansult :- Sale Price = s 19 Per writ Variable lost = $3 per writ Fixed Cost = 4 soooo per month $6,000 per year BEP for Projected cost & Revenue : BEP = Per unit . Cocondo fixed cost - Contribution 4.6 có, có : $16 BỆP : 37sco uy W-Nate : Calculation of fiseed cost & Contribution Per unit Fixed cost astroo Pom x 12 forced cost Per = 1. Groove _€ Contribution P.W. : $16 : Sale Price - Vatiwale wat tis - 13 is 1 BEP is a point or situation where organisation 5. in position at no profit or no loss, here I at this Pourt organisation covered all their fisced cost.

Actual wst a Revenue o Sale Price = sig Variable cost : $ 3.3 (107 bisher) fixed cost $suceco per year (107. louet - than Prajected) • Break even Paust For Actical- BEP Pou.. = Fireed lost Contribution : * succeo $15.7 BEP 34 395 (OH) o Impact of these wst changes have an opesating Pencafit for the year it BEP BEP of of Projected data = 37500 unit actual data = 34395 unset To cover its fiseed lost Warner clothing Actuall has to incurred or sale 34395 uret rather on 2500 unit (Projected), so here warnet clothing here is in surplus of 3105 uret which result in higher operating Profit

» Profit well so up because in actual forced con I concred in few items selling rather than Projected. It improves the cap profit of Warner clothing alculation of operating profit hlill to upsa , c+4 BEP . 37sGo ai Acterou BEP = 34395 wrzet (approx) Variance = 37500 - 3u395 Variance - 3105 uret of chanse = 3105 unit x contribution ( (operating Psort) = 3105*15.7 48718 Canprore) . After selling of 3u395 unet, fizced cost will be covered & After this every selling of item covered the $15.7 ($19 - $33) as profit. So here $4870& aurourt of profit will so up by these lost changes in a year.