Question
Argentina Partners is concerned about the possible effects of inflation on its operations.
Saved Help Save Required: a. Compute the volume in units and the dollar sales level necessary to maintain the present profit
Saved Help Save Required: a. Compute the volume in units and the dollar sales level necessary to maintain the present profit
z Help ** U w y. PIL MUY y un Required: a. Compute the volume in units and the dollar sales level necessary to maintain the p


Help Save Problem 3-48 (Algo) CVP Analysis and Price Changes (LO 3-1) Argentina Partners is concerned about the possible effe
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Answer #1

Part 1

Volume in units

70171

Sales

$3087524

Current profit = 67,000 units × ($40 – $21) – $770,000 = $503,000

New variable cost per unit:

Labor+Materials+Overhead = (120% × 60% × $21) + (115% × 20% × $21) + (125% × 20% × $21) = $25.20

New price=110% × $40 = $44.00

New fixed costs=106% × $770000 = $816200

Sales:Profit target=$503000

Profit=(P – V)X – F

$503,000=($44.00 – $25.20)X – $816200

X=$1319200 ÷ ($44.00 – $25.20)=70,171 units (rounded up)

Sales in dollars = 70,171 × $44.00=$3087524

Part 2

Volume in units

72044

Sales

$3169936

Profit target = $503,000 × 107%= $538210

Profit=(P – V)X – F

$538210=($44.00 – $25.20)X – $816200

X=$1354410 ÷ ($44.00 – $25.20)=72044 units (rounded up)

Sales in dollars = 72044 × $44.00=$3169936

Part 3

New price

$45.42

Profit=PX – VX – F

$538210 =P(67,000) – ($25.20 × 67,000) – $816200

P=$3042810 ÷ 71,000

P=$45.42 (rounded)

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