EXAMPLE QESTION

The examples below will show us which combination of unit variable costs, fixed costs,

and selling price, management is proposing, the nature of trade$-$offs facing management,

and the effect of a proposed policy on the company's profits.

Use the information in the chart below for Acoustic Concepts, Inc. in all of the examples.

Change in fixed cost and sales volume

What is the impact if Acoustic increases sales by $30\%$ to $520$ speakers by increasing the

monthly advertising budget by $$10,000?$

Change in variable costs and sales volume

What is the profit impact if Acoustic can use higher quality raw components, thus

increasing variable costs per unit by $$10,$ to generate an increase in unit sales by $20\%$ to

$480?$

Change in fixed cost, sales price, and sales volume

What is the profit impact if Acoustic cuts its selling price $$20$ per speaker, increases its

advertising budget by $$15,000$ per month, and increases unit sales by $50\%$ from to $600$

units per month?