Question
Presented is the current year contribution income statement of Grafton Products. Next year, Grafton expects an increase in variable manufacturing costs of $10 per unit
Presented is the current year contribution income statement of Grafton Products.
Next year, Grafton expects an increase in variable manufacturing costs of $10 per unit and in fixed manufacturing costs of $30,000.
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If sales for next year remain at 15,000 units, what price should Grafton charge to obtain the same profit as last year?
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Management believes that sales can be increased to 18,000 units if the selling price is lowered to $165. Is this action desirable? (Use the cost data from part a.)
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After considering the expected increases in costs, what sales volume is needed to earn a pretax profit of $200,000 with a unit selling price of $165?
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