marketing manager; Li Chen, quality manager; Kevin Jones, production manager; and Helen Jackson, controller). TERRELL: I don't understand why we're losing bids. Megan, do you have an explanation? Otherwise, our sales will drop to about 20,000 to 25,000 per year. would be $200,000 to $250,000. If we have to lose, let's just take the lower market share. It's better than lowering our prices. to rethink our whole competitive strategy-at least if we want to stay in business. Ideally, we should match the price reduction and work to reduce the costs to recapture the lost contribution margin. percent of current sales. That's excessive, and we believe that they can be reduced to about 4 percent of sales over time. TERRELL: This sounds good. Li, how long will it take for you to achieve this reduction? full benefit. Keep in mind that this is with an improvement in quality. that we can increase sales by about 10,000 units for every $1 of price reduction beyond the $92 level. Kevin, how much extra capacity for this line do we have? KEVIN: We can handle an extra 30,000 or 40,000 tables per year. quarters 2. Assume that Gaston holds the price at $92 until the 4 percent target is achieved. At this new level of quality costs, should the price be reduced? If so, by how much should the price be reduced. Assume that price can be reduced only in $1 increments. per unit What is the increase in contribution margin? 10.45% rounds to 10.5% ). Round your final answer to one decimal place. Price can decrease by $1 after quarters