Question
Jones Company produces a product that has a variable cost of $27 per unit and a sales price of $59 per unit. The companys annual
Jones Company produces a product that has a variable cost of $27 per unit and a sales price of $59 per unit. The companys annual fixed costs total $720,000. It had net income of $280,000 in the previous year. In an effort to increase the companys market share, management is considering lowering the selling price to $52 per unit. Required: a. If Jones desires to maintain net income of $280,000 how many additional units must it sell to justify the price decline? b. Assume that in addition to lowering its selling price to $52, Jones also desires to increase its net income by $75,000. Determine the number of units the company must sell to earn the desired income.
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