Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The first two paragraphs are the same as in Question 4; the remaining information is different. DestressWithChocolate Company produces a high-quality chocolate almond bar. Each
The first two paragraphs are the same as in Question 4; the remaining information is different. DestressWithChocolate Company produces a high-quality chocolate almond bar. Each bar sells for $4.00. Variable costs for each bar (sugar, chocolate, almonds, wrapper, labor, etc.) total $1.50. Total fixed costs are $1,500,000. In March 2020, 2 million bars were sold. The President of DestressWithChocolate is not satisfied with the profit performance of the chocolate almond bar and has asked her team to propose several options to increase profitability. In May 2020, DestressWithChocolate increased the selling price of the bar to $5.00 but did not otherwise change operations. Volume decreased to 1,200,000 bars. Was the decision to increase the price a good one, and why or why not? Yes - the breakeven point was lower after the price increase. No - the volume decrease resulted in higher fixed costs per chocolate bar, leading to lower operating income. No - contribution margin per unit increased but the volume decreases offset that effect, leading to lower operating income. Ver Yes - the new selling price led to higher revenue but variable costs per unit did not increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started