Question

Sugment reporting- ACCT-2302 G003 8W2 Principles of Outback Outfitters sells recreational equipment. One of the companys pro
3. At present, the company is selling 18,000 stoves per month. The sales manager is convinced that a 10% reduction in the sel
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Answer #1

3.

Outback Outfitters
Present Proposed
18000 Stoves 22500 Stoves
Total Per unit Total Per unit
Sales 1980000 110 2227500 99
Variable costs 1386000 77 1732500 77
Contribution margin 594000 33 495000 22
Fixed costs 138600 138600
Net operating income $ 455400 356400

Proposed selling price per unit = $110 - (10% x $110) = $110 - $11 = $99

Note: The variable cost per unit and monthly fixed costs have been considered to remain the same under the proposed change.

4.

Number of stoves to be sold 9664

Unit sales for desired net operating income = (Fixed costs + Desired net operating income) / Contribution per unit = ($138600 + $74000)/$22 = $212600/$22 = 9663.636 = 9664 stoves

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