The accountants at French Perfumery decided to increase the price of a scent called Breezy by 11 %, from $ 6.84 per bottle to $ 7.59 . French's accountants expect the 11 % price increase to reduce unit sales by 23 %. Current sales are 228,000 bottles, and total variable costs are $ 912,000 .

Required

Estimate the pretax profit effect of the price change, assuming no effect on the variable cost rate, on total fixed costs, or on sales of other products.

Calculate the contribution margin at the old and new prices and volumes.

Answer rating: 100% (QA)

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