Homework Answers
Answer A and B is correct.
c.
New sales price = $39*110% = $42.9
Variable costs = $21
Contribution per unit = $21.9
New sales units = 51300 - 20000 = 31300 units
Total contribution = Contribution per unit * No of units = $21.9 * 31300 units = $685470
Profit = Contribution - fixed costs = $685470- $181000 = $504470
d. New breakeven point = fixed costs / Contribution per unit = $181000/ $21.9 = 8264.84 = 8265 units
e. No of units to be sold to get same operating profit=x units
Current profit = $742400 =( $21.9 * X ) - $181000
X = ($742400 + $181000) / $21.9 =42164 units
The manager would not want to implement the price increase if demand drops by = 51300 - 42164 = 9316 units
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