The sustainability manager is concerned about the long term sustainability implications of Deluxe Boxes on the environment and suggests changing to sustainable materials for the production of a Sustainable Deluxe Box. If the company switches the current quantity of Deluxe Boxes sold, to Sustainable Deluxe Boxes, there will be some cost implications. 1) The Sustainable Deluxe Boxes could be made cheaper, and the sustainability manager believes that the company could sell the sustaianable Deluxe Boxes for $23 per box and end up making substantially higher profit than they ever did on the Deluxe Boxes. Based on knowledge of price elasticity of demand s/he/they suggest that it may in time even result in much higher sales volumes. The markeing manger believes that a lower selling price will also entice current Deluxe Box customers to accept the switch over. 2) The new Sustainable Deluxe Boxes will still attract 60% of fixed costs allocated to the old Deluxe Box under the ABC method used in tab 3. 3) The number of boxes sold will not currently be affected by this new selling price, as this is a very select group of customers to LGI. 4) The Standard Box costs and revenue will remain the same as that calculated under the ABC method 5) The variable costs for the Sustainable Deluxe Bxes will reduce to $11.

Required (complete the grey spaces) 1) Determine the profit and profit percentage for the Standard and Sustainable Deluxe Boxes

Sustainable Deluxe Standard Boxes Boxes Total Quantity 108.00 18.00 126.00 Selling price per unit 18.80 23 Revenue S 2,030.40 414.00 S 2,444.40 Subtract: Variable Costs 1,080.00 360.00 1,440.00 Equals: Contribution Margin 950.40 54.00 S 1,004.40 Subtract: Fixed Costs S 120.00 S 36.00 S 156.00 Equals: Profit 830.40 18.00 5 848.40 Profit % (based on revenue) 40.90% 4.35% 35%