Outback Outfitters sells recreational equipment. One of the company\'s products,
ID: 2346465 • Letter: O
Question
At present, the company is selling 17.000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes. Show both total and per unit data on your statements. (Omit the $ sign in your response.)
Explanation / Answer
Present: 17,000 stoves
Proposed 21,250 stove
Total
Per unit
Total
Per unit
sales
1700000.00
100.00
1912500.00
90.00
variable exp
1190000.00
70.00
1487500.00
70.00
cont. margin
510000.00
30.00
425000.00
20.00
fixed exp
144000.00
144000.00
net op income
366000.00
281000.00
25% increase in sales = 17000*1.25 = 21250
10% decrease in sales price = 100*(1-.10) = 90
Present: 17,000 stoves
Proposed 21,250 stove
Total
Per unit
Total
Per unit
sales
1700000.00
100.00
1912500.00
90.00
variable exp
1190000.00
70.00
1487500.00
70.00
cont. margin
510000.00
30.00
425000.00
20.00
fixed exp
144000.00
144000.00
net op income
366000.00
281000.00
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