Question
Guthrie Fabrications is a single-product firm facing intense competition. Management at Guthrie predicts that a new marketing strategy will help improve sales in the coming
Guthrie Fabrications is a single-product firm facing intense competition. Management at Guthrie predicts that a new marketing strategy will help improve sales in the coming year. The company believes that cutting the sales price per unit will increase sales volume, but expect to see an increase in fixed expenses due to planned additions to Guthrie's productive capacity. Furthermore, Guthrie's suppliers (vendors) have already suggested some materials prices will need to increase in the coming year due to new regulations.
In summary...
- Sales Price per unit will decrease.
- Variable Costs per unit will increase.
- Sales Volume will increase.
- Fixed Costs in total will increase.
Given the changes suggested above, which of the following effects should management expect to see? Select all that apply.
Contribution margin per unit will increase. | ||
Contribution margin per unit will decrease. | ||
Break-Even Point in units will increase. | ||
Break-Even Point in units will decrease. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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