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Derby Phones is considering the introduction of a new model of headphones with the following price and cost characteristics. Sales price Variable costs Fixed costs 17 per unit 8 per unit 29,000 per month Assume that the projected number of units sold for the month is 7,500. 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? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What is the impact on operating profit if the sales price decreases by 10 percent? Increases by 20 percent? (Do not round intermediate calculations.) Sales price decreases by 10 percent: Sales price increases by 20 percent: Operating profit Operating profit decreases increases by $ by EA $ EA 15 20 Derby Phones is considering the introduction of a new model of headphones with the following price and cost characteristics. Sales price Variable costs Fixed costs 17 per unit 8 per unit 29,000 per month Assume that the projected number of units sold for the month is 7,500. 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? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What is the impact on operating profit if the sales price decreases by 10 percent? Increases by 20 percent? (Do not round intermediate calculations.) Sales price decreases by 10 percent: Sales price increases by 20 percent: Operating profit Operating profit decreases increases by $ by EA $ EA 15 20
Expert Answer:
Answer rating: 100% (QA)
a To calculate the operating profit we need to first calculate the contribution margin per unit and then deduct the fixed costs Contribution margin per unit Sales price Variable costs 17 8 9 Total con... View the full answer
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher
Posted Date:
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