Question 7

[The following information applies to the questions displayed below.) Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $516 each. Costs 1. Plastic for casing-$19,000 2. Wages of assembly workers--$90,000 3. Property taxes on factory-$7,000 4. Accounting staff salaries-$33,000 5. Drum stands (1.000 stands purchased)-$35,000 6. Rent cost of equipment for sales staff-$36.000 7. Upper management salaries-$170,000 8. Annual flat fee for factory maintenance service--$16,000 9. Sales commissions-$25 per unit 10. Machinery depreciation, straight-line-$42,000 7) Changing sales price: Marketing research indicates that TrueBeat Company can sell more units of its product if they lower their sales price by 10% per unit. Remember to treat this scenario as independent from the items considered in 6. a) Calculate the new (1) sales price and (ii) contribution margin per unit. i) new sales price ii) CM per unit iii) What will the new Profit formula be? b) How many units will they need to sell to make the same operating income (NOI) as originally projected for year 4 (base assumption)? c) How many units will they need to sell to break-even at the new sales price? d) If TrueBeat Company can sell 20% more units (2 times original units) with the decreased sales price, how much operating income will they make? e) Conclusion: Using the information calculated above, should TrueBeat lower their sales price? Why or why not? Will their relevant range be an issue for this decision? Your answer should include full sentences and 30 to 50 words