Question

Clarkson Computer Company distributes a specialized wrist support that sells for $30. The company's variable costs are $12 per unit; fixed costs total $360,000 each year.

Required
a. If sales increase by $39,000 per year, by how much should operating income increase?
b. Last year, Clarkson sold 32,000 wrist supports. The company's marketing manager is convinced that a 5% reduction in the sales price, combined with a $50,000 increase in advertising, will result in a 30% increase in sales volume over last year. Should Clarkson implement the price reduction? Why or why not?



$1.99
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  • CreatedFebruary 21, 2014
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