I need help with questions 5 - 6. Thank you!
Answer 5.
Original Data:
Units Sold = Sales / Selling Price per unit
Units Sold = $3,120,000 / $120.00
Units Sold = 26,000
New Data:
Selling Price per unit = $120 - 14% * $120
Selling Price per unit = $103.20
Variable Expense per unit = $60.00
Fixed Expenses = $200,000 + $71,000
Fixed Expenses = $271,000
Number of units sold = 26,000 + 25% * 26,000
Number of units sold = 32,500
No, the manager should not implement these changes as net operating income will decrease by $227,000 ($1,360,000 - $1,133,000)
Answer 6.
Selling Price per unit = $120.00
Variable Expense per unit = $60.00 + $1.70
Variable Expense per unit = $61.70
Let increase in advertising be $x
Fixed Expenses = $200,000 + $x
Number of units sold = 26,000 + 25% * 26,000
Number of units sold = 32,500
Net Operating Income = Sales - Variable Expenses - Fixed
Expenses
Net Operating Income = Selling Price per unit * Number of units
sold - Variable Expense per unit * Number of units sold - Fixed
Expenses
$1,360,000 = $120.00 * 32,500 - $61.70 * 32,500 - ($200,000 +
$x)
$1,360,000 = $3,900,000 - $2,005,250 - $200,000 - $x
$x = $334,750
Increase in advertising expense is $334,750
I need help with questions 5 - 6. Thank you! Feather Friends, Inc., distributes a high-quality...
Please help.
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I just need help on 5 & 6 please. Thank you!
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