Homework Answers
a.Curren profit
| Selling Price | $35 |
| Variable Costs | $23 |
| Contribution per unit | $12 |
| Units sold | 51600 units |
| Total Contribution | $619200 |
| Less: Fixed Costs | $188000 |
| Current Profit | $431200 |
b.Current Break even point
= Fixed Costs/ Contribution per unit
=$188000 / $12 = 15666.66 units = 15667 units
c. Profit if the selling price is increased
New sales price = $35 * 110% = $38.5
New Sales volume = 51600 units - 20000 units = 31600 units
| Selling Price | $38.5 |
| Variable Costs | $23 |
| Contribution per unit | $15.5 |
| Units sold | 31600 units |
| Total Contribution | $489800 |
| Less: Fixed Costs | $188000 |
| Current Profit | $301800 |
New sales price = $35 * 110% = $38.5
New Sales volume = 51600 units - 20000 units = 31600 units
d. Breakevenpoint if price is increased
= Fixed Costs/ Contribution per unit
=$188000 / $15.5 =12129.0322 units = 12129 units
e. let X be tge No of units to be sold to get same operating profit
$431200 = X * $15.5 - $188000
X = $619200 / $15.5 = 39948.387units = 39948 units
Drop in deman for the manager to not want to implement the price increase = 51600 - 39948 = 11652 units
Since they asked to not round intermediate calculations , 51600 - 39948.387 = 11651.61 = 11652 units
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