Pedalheads has just found out that the supplier of the main material in the bikes, carbon fibre, is expecting material costs to increase by 8.5%. Pedalheads had done some direct materials analysis and believes that its unit costs will increase by 4.5%. As a result, they plan to increase the selling price by 4.5% also. Is this a smart move? What is the impact to operating profit at current sales levels?

Answer rating: 100% (QA)

Increasing the selling price by 45 to offset the 45 increase in unit costs due to rising ... View the full answer