2.

Buzby Corporation manufactures numerous products, one of which is called Epsilon-39. The company has provided the following data about this product: Unit sales a) Selling price per unit Variable cost per unit 86,000 43.00 25.00 S 18.00 Contribution margin per unit (b) Total contribution margin (a) x (b) Traceable fixed expense $1,548,000 1,080,000 468,000 Net operating income Required: a. Management is considering decreasing the price of Epsilon-39 by 5%, from $43.00 to $40.85. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 86,000 units to 94,600 units. Assuming that the total traceable fixed expense does not change, what net operating income will Epsilon-39 earn at a price of $40.85 if this sales forecast is correct? b. Assuming that the total traceable fixed expense does not change, how many units of Epsilon-39 would Buzby need to sell at a price of $40.85 to earn the same net operating income that it currently earns at a price of $43.00? (Round your answer up to the nearest whole number.) a. Net operating income b. Q units Eytchison Industrial Products Inc. has developed a new industrial grinder, model OK-23, that is designed to offer superior performance to a comparable grinder sold by Eytchison's main competitor. The competing grinder sells for $50,000 and needs to be replaced after 1,000 hours of use. It also requires $9,400 of preventive maintenance during its useful life. Model OK-23's performance capabilities are similar to the competing grinder with two important exceptions-it needs to be replaced only after 3,000 hours of use and it requires $18,800 of preventive maintenance during its useful life. Required: From a value-based pricing standpoint what is model OK-23's economic value to the customer over its 3,000 hour life? Economic value