Derby Phones is considering the introduction of a new model of headphones with the following price and cost characterist
Posted: Sat Feb 19, 2022 2:33 pm
Derby Phones is considering the introduction of a new model of
headphones with the following price and cost characteristics.
Sales price $ 21 per unit
Variable costs 9 per unit
Fixed costs 28,000 per month
Assume that the projected number of units sold for the month is
6,000. Consider requirements (b), (c), and (d) independently of
each other.
Required:
a. What will the operating profit be?
b. What is the impact on operating profit if the sales price
decreases by 10 percent? Increases by 20 percent?
c. What is the impact on operating profit if variable costs per
unit decrease by 10 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 for the year? Will profit go up? Down? By how
much?
headphones with the following price and cost characteristics.
Sales price $ 21 per unit
Variable costs 9 per unit
Fixed costs 28,000 per month
Assume that the projected number of units sold for the month is
6,000. Consider requirements (b), (c), and (d) independently of
each other.
Required:
a. What will the operating profit be?
b. What is the impact on operating profit if the sales price
decreases by 10 percent? Increases by 20 percent?
c. What is the impact on operating profit if variable costs per
unit decrease by 10 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 for the year? Will profit go up? Down? By how
much?