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Sales revenue $40,000 Incremental Variable cost $16,000 Nonincremental Fixed cost $20,000 [Note: you can assume that variable costs are constant so that the average of
Sales revenue $40,000 Incremental Variable cost $16,000 Nonincremental Fixed cost $20,000 [Note: you can assume that variable costs are constant so that the average of them is also the variable cost relevant for a change in sales.] The company is enjoying stable demand with its current pricing, but management is looking for ways to increase profitability. One suggestion is that the company reposition its water as a premium product, justifying a higher price. If successful, the company believes that it could charge 20% more for its water than it does now. What is the maximum sales loss (in units) that Healthy Spring could tolerate before a 20% price increase would fail to make a positive contribution to its profitability? (That is, what is the basic break-even sales change?) Please show all calculations. Thank you
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