Question

Refer to Grover’s Steel Parts in E7- 23A. Grover feels like he’s in a giant squeeze play: The automotive manufacturers are demanding lower prices, and the steel producers have in-creased raw material costs. Grover’s contribution margin has shrunk to 40% of revenues. The company’s monthly operating income, prior to these pressures, was $ 77,000.

Requirements
1. To maintain this same level of profit, what sales volume (in sales revenue) must Grover now achieve?
2. Grover believes that his monthly sales revenue will go only as high as $ 1,010,000. He is thinking about moving operations overseas to cut fixed costs. If monthly sales are $ 1,010,000, by how much will he need to cut fixed costs to maintain his prior profit level of $ 77,000 per month?



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  • CreatedAugust 27, 2014
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