Question: Pricing decisions: Total fixed costs are $25,000. Unit variable cost is $20. At current selling price of $50, you sell 1,000 units per month. If

Pricing decisions: Total fixed costs are $25,000. Unit variable cost is $20. At current selling price of $50, you sell 1,000 units per month. If you reduce the price by 10%, sale volume will increase to 1,300 units. A.Compute profit at the original price: B. Compute profit at the reduced price: C. Should you reduce the price?

YES, because revenue will increase by $8,500

NO, because a lower price always reduces profit

YES, because profit will increase by $2,500

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

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

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

1. A business borrowed $200 000 from GT Finance. The effect of this transaction on the accounting equation is: A. decrease loan from GT Finance $200 000; decrease cash $200 000. B. increase loan from...

Question 3: Pricing decisions Total fixed costs are $15,000. Unit variable cost is $30. At current selling price of $75. you sell 1,000 units per month. If you reduce the price by 10% sale volume...

i want the answer or solution to this Mid-test copy The University of the South Pacific Serving the Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau,...

PROJECT TWO: EVALUATING BUSINESS ALTERNATIVES Purpose: Identify which new business is more feasible of the two options below, based on break-even analysis and additional research. You will become...

Hello, please help me with an assignment "The Mahela Company specializes in producing sets of wooden patio furniture consisting of a table and four chairs" Thanks Concept Review Assignment (Worth 2%...

1) The main decision for a profit maximizing perfectly competitive firm is not what ________ but what ________. A.level of output to produce; price to charge B.price to charge; level of output to...

The firm's fixed costs are $100 000, variable cost per unit is $10 and selling price per unit is $30. The break-even point in units is Select one: 20 000 10 000 5 000 3 333 Sentosa Products Sentosa...

Collars With pricing at $20 per collar, you can expect to sell 30 collars per day. With pricing at $24 per collar, you can expect to sell 25 collars per day. With pricing at $28 per collar, you can...

Question 3: Pricing decisions Total fixed costs are $15,000. Unit variable cost is $10. At current selling price of $25, you sell 1,000 units per month. If you reduce the price by 10%, sale volume...

I need direct answer just to compare with my solutions Thanks ================================================== Bristo Corporation has sales of 2,500 units at $50 per unit. Variable expenses are 20%...

How does the auditor assess control risk for the acquisition and expenditure process? Is the auditor likely to test internal controls for this process? Explain your answer.

Why is it important for public companies to have an audit of managements assessment of internal control?

Diversification will not reduce the riskiness of a portfolio of stocks if the average stock correlation is + 0 . 3 5 ? True or False?

Problem 2 ( 3 5 points ) R 2 = 4 8 6 0 = 0 . 8 R 3 = 1 2 8 6 0 = 2 . 1 3 Consider the following tasks that must be assigned to three workers on a worker paced ( bottleneck - paced ) assembly line....

Every time we allow the post offi ce to deliver packages late and we just grumble to ourselves and say nothing to our postal carriers, we enable mail delivery services around the world to continue at...

Every time we go to a restaurant that is overbooked and we have to wait thirty minutes for our reserved table and we dont speak up, diners let the owners believe this is an acceptable practice. Some...

How much energy is consumed by staff confl icts because people dont feel comfortable handling personal criticism? What can be done to change this pattern?