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Clipper Company sells two types of nail clippers. One focuses on the economy oriented customer and the other aims to satisfy the high-end clientele.
Clipper Company sells two types of nail clippers. One focuses on the economy oriented customer and the other aims to satisfy the high-end clientele. The economy clipper costs $9 and has a sales price of $13. The high-end model costs $13 and sells for $19. Fixed costs associated with this product line amount to $45,080. Economy clippers constitute 70 percent of the market with the remaining 30 percent being high-end clippers. Assume Clipper Company currently sells 10,500 units of clippers and earns a $21,620 profit. Management believes the profitability can be improved by shifting the sales mix to 60 percent share for the economy line and 40 percent for the high-end line. The company believes it can continue to sell a total of 14,500 under the new sales mix. If management is able to accomplish the shift in sales mix Multiple Choice profit will increase by $2,900. profit will increase by $24,520. profit will decrease $21,620. profit will not be affected.
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