QUESTION 1 (CLO2)

Tennis Products Corporation produces three models of high-quality tennis rackets. The following table contains recent information on the sales, costs, and profitability of the three models:

MODELAVERAGE CURRENT TOTAL VARIABLE

CONTRIBUTION PRICE ($) REVENUE ($) COST PER

SOLD UNIT ($)

(UNITS/MONTH)

A 15,000 $30 $450,000 $15

B 5,000 $35 $175,000 $18

C 10,000 $45 $450,000 $20

TOTAL $1,075,000

MODEL CONTRIBUTION CONTRIBUTION

MARGIN PER MARGIN ($)*

UNIT ($)

A $15 $225,000

B $17 $85,000

C $25 $250,000

TOTAL $560,000

*Contribution to fixed costs and profits.

1. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin for the entire line of tennis rackets.

(8)