Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 Contribution margin per unit (b) Total contribution margin (a) x (b) Traceable fixed expense Net operating income 80,000 $ 43.00 25.00 $ 18.00 $1,440,000 1,050,000 $ 390,000 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 80,000 units to 88,000 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. Number of Units units
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started