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ABC Company is thinking of introducing a new high-quality tennis racket to their product line. Based on the market analysis performed, ABC has determined that
ABC Company is thinking of introducing a new high-quality tennis racket to their product line. Based on the market analysis performed, ABC has determined that customers will be willing to pay $100 to purchase this racket. Management will only provide new products if those products can achieve a minimum gross profit rate of 35%. At the $100 price, ABC anticipates selling 10,000 tennis rackets.
The Vice President of Sales for ABC has performed an additional analysis. Based on this analysis, ABC could sell 14,000 tennis rackets if they reduced the price to $90 per racket.
Assuming ABC can achieve the targeted costing under either price scenario, what would be the difference in gross profit dollars between these two alternatives?
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