Problem 8-8 Kennel Ventures is considering producing a new line of hang gliders. The company estimates that variable costs will be $410 per unit and fixed costs will be $384,000 per year.

Kennel has a pricing policy that dictates that a products price must be equal to full cost plus 50 percent. To calculate full cost, Kennel must estimate the number of units it will produce and sell in a year. At the beginning of the year, Kennel estimates that it will sell 1,600 gliders and sets its price according to that sales and production volume. What is the price?

Price

$

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Right after the beginning of the year, the economy takes a dive and Kennel finds that demand for their gliders has fallen drastically. Kennel revises its sales and production estimate to just 1,000 gliders for the year. According to company policy, what price must now be set? (Round answer to 2 decimal places, e.g. 125.25.)

Revised price

$

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What is likely to happen to the number of gliders sold if Kennel follows company policy and raises the glider price to that calculated in part b? Likely to increaseLikely to remain sameLikely to fall