Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors. The company has collected the following price and cost characteristics.

Sales Price $15 per unit

Variable Costs $5 per unit

Fixed Costs 47,000 per unit

Assume that the company plans to sell 7,000 units per month. Consider requirements (b), (c), and (d) independently of each other.

Required:

a. What will be the operating profit?

b. What is the impact on operating profit if the sales price decreases by 15 percent? Increases by 30 percent?

c. What is the impact on operating profit if variable costs per unit decrease by 15 percent? Increase by 20 percent?

d. Suppose that fixed costs for the year are 10 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit gor the year? Will profit go up? Down? By how much?