Question: Harry s Sandwich Shop uses a process costing system for its foot - long sub sandwiches and carries no beginning or ending Work in Process

Harrys Sandwich Shop uses a process costing system for its foot-long sub sandwiches and carries no beginning or ending Work in Process inventories. During 2017, the company produced and sold 5,000 subs and incurred the following costs:
Total Per equivalent unit
Direct material $ 5,600 $1.12
Direct labor 8,8001.76
Manufacturing overhead 7,2001.44
Total $21,600 $4.32
The current selling price is $6.25 per sub and the gross profit for 2017 was ($6.25\times 5,000)($4.32\times 5,000)= $9,650. Sales projections for 2018 at the current price look flat, but the manager believes that if the sales price is reduced to $5.80, sales volume would increase by 600 units. Assume that direct material and direct labor are variable costs and that manufacturing overhead costs are primarily fixed. Should Harrys Sandwich Shop lower the selling price?

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