Question: Herrera Company manufactures a product that has a variable cost of $27 per unit and a sales price of $72 per unit. The companys annual

Herrera Company manufactures a product that has a variable cost of $27 per unit and a sales price of $72 per unit. The company’s annual fixed costs total $810,000. It had net income of $360,000 in the previous year. In an effort to increase the company’s market share, management is considering lowering the selling price to $67 per unit.

Required
a. If Herrera desires to maintain net income of $360,000, how many additional units must it sell to justify the price decline?
b. Assume that in addition to lowering its selling price to $67, Herrera also desires to increase its net income by $70,000. Determine the number of units the company must sell to earn the desired income.

Step by Step Solution

★★★★★

3.45 Rating (161 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Required sales Fixed cost Desired profit Contribu... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

276-B-M-A-C-V-P (1446).docx

120 KBs Word File

Students Have Also Explored These Related Managerial Accounting Questions!

STORY: Let us suppose that the average weight of all the 5-axle semi-trucks that drive on Florida highways is 75000 lbs, the standard deviation is 3000 lbs, and 47% of them have red tractor units....

Tobin Company manufactures a product that has a variable cost of $38 per unit and a sales price of $78 per unit. The company's annual fixed costs total $720,000. It had net income of $360,000 in the...

Mendez Company manufactures a product that has a variable cost of $30 per unit. The companys fixed costs total $750,000. Mendez had net income of $90,000 in the previous year. Its product sells for...

The manufacturer of a product that has a variable cost of $2.50 per unit and total fixed cost of $125,000 wants to determine the level of output necessary to avoid losses. a. What level of sales is...

Ratio Analysis 1. The current ratio for a company with current assets of $70,000, quick assets of $30,000, total assets of $150,000 current liabilities of $50,000 and net sales of $80,000 would be:...

A segment has the following data: * Sales $350,000 Variable expenses 150,000 Fixed expenses 275,000 What will be the incremental effect on net income if this segment is eliminated, assuming the fixed...

I need these ASAP!! Just the answers!! Question 26 (3 points) Listen In most cases, prices are set by the 6 customers. largest competitor. competitive market. selling company Question 27 (7 points)...

Preston Company manufactures a product with a unit variable cost of $140 and a unit sales price of $264. Fixed manufacturing costs were $720,000 when 10,000 units were produced and sold. The company...

I need these ASAP!! Just the answers!! Question 27 (7 points) Listen Justin Company manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs...

I need these ASAP!! Just the answers!! Question 26 (points) In most cases, prices are set by the customers. largest competitor. competitive market. selling company Question 27 (7 points) Listen...

Finch Company produces a product that has a variable cost of $27 per unit and a sales price of $62 per unit. The companys annual fixed costs total $780,000. It had net income of $340,000 in the...

An investment scheme pays $10,000 one year from now, $30,000 three years from now, $50,000 five years from now. You require 11% return on your money. If you are asked to pay $55,000 for this scheme,...

During 2016, Tommy's Toys reported the following: long-term debt repayments, $503 million; Interest paid, $143 million; proceeds from exercise of stock options, $27 million, and issue of common stock...

Michelin is considering going lights out in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber,...

Identify an online brand that you currently follow or might be interested in following. Find their official website and publishing channels and scan through recently published content and analyze it...

This part requires you to develop new ideas for improving the physical environment. It includes a presentation These could include collaborative spaces, social areas, inspirational features such as...

Q1) What steps of marketing segmentation does Mulally and Ford has to follow to have a greater impact in the Car Industry? Q2) Can Mulally be succeed with small world cars? If yes then what influence...

A block of mass m slides upward along a frictionless ceiling under the influence of a known vertical applied force P. If the block starts from rest and encounters a force of air resistance given by...

Show (a) that mass m executes simple harmonic motion (SHM) and (b) determine the equilibrium position of the mass. Assume the spring constant is k and the incline is frictionless, m 0.

Is the strategy appropriate to the desired level of contribution to society?

Ethical Dilemma Profitability versus social conscience ( effects of cost behavior ) Advances in biological technology have enabled two research companies, Bio Labs, Inc., and Scientific Associates,...

Charlie Stork rented a truck for his business on two previous occasions. Since he will soon be renting a truck again, he would like to analyze his bills and determine how the rental fee is...

Siwa Company makes and sells a decorative ceramic statue. Each statue costs $50 to manufacture and sells for $75. Siwa spends $3 to ship the statue to customers and pays salespersons a $2 commission...

Dividend Yield. BMM Industries pays a dividend of $2 per quarter. The dividend yield on its stock is reported at 4.8%. What price is the stock selling at? ( LO7-1 )

Last year Carson Industries issued a 1 0 - year, 1 4 % semiannual coupon bond at its par value of $ 1 , 0 0 0 . Currently, the bond can be called in 6 years at a price of $ 1 , 0 7 0 and it sells for...

You are making forecasts for two securities that promise perpetual, growing annual cash flows. For both securities , calculate the cash flow you can expect at the end of year 7 ( that is , seven...