Gray Fullbuster Inc. manufactures Ice Cube Trays. One of the managers is considering raising the current...

  

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Gray Fullbuster Inc. manufactures Ice Cube Trays. One of the managers is considering raising the current price of ice cube trays $31 per unit by 10%. If this price increase goes through, it is estimated that demand will decrease by 20,000 units per month. Gray currently sells 51,600 units per month, each of which costs $22 in variable costs. Fixed costs are $182,000. Required: a. What is the current profit? b. What is the current break-even point in units? c. If the manager raises the price, what will profit be? d. If the manager raises the price, what will be the new break-even point in units? e. Assume the manager does not know how much demand will drop if the price increases. By how much would demand have to drop before the manager would not want to implement the price increase? Gray Fullbuster Inc. manufactures Ice Cube Trays. One of the managers is considering raising the current price of ice cube trays $31 per unit by 10%. If this price increase goes through, it is estimated that demand will decrease by 20,000 units per month. Gray currently sells 51,600 units per month, each of which costs $22 in variable costs. Fixed costs are $182,000. Required: a. What is the current profit? b. What is the current break-even point in units? c. If the manager raises the price, what will profit be? d. If the manager raises the price, what will be the new break-even point in units? e. Assume the manager does not know how much demand will drop if the price increases. By how much would demand have to drop before the manager would not want to implement the price increase?

Answer rating: 100% (QA)

aThe current profit can be calculated as follows Total revenue Current price x Current salesTotal revenue 31 x 51600Total revenue 1600400 Total variable cost Variable cost per unit x Current salesTota... View the full answer