Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 5.00 p per unit. Fixed costs are expected to amount to 60.000 p, fur the year, and all variable manufacturing and administrative costs are expected to he incurred at a rate of 3.00 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 10 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency, Many countries use the peso as their national currency. On the day this exercise was written. Argentina’s peso was worth .3274 U.S. dollar.)
Required:
l. Suppose management alters its current plans by spending an additional amount of 5,000 pon advertising and increases the selling price to 6.00 p per unit. Calculate the profit on 60,000 units.
2.The Sorde Company has just approached Corrientes to make a special one-time purchase of 10,000 units. These units would not be sold by the sales personnel, and, therefore, no commission would have to be paid. What is the price Corrientes would have to charge per unit on this special order to earn additional profit of 20,000 p?
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