0.7) Shareef’s Window Company is in the process of preparing a production cost b

Question

0.7) Shareef’s Window Company is in the process of preparing a production cost budget for August. Actual costs in July for 120 windows were:

Materials cost $ 4,800
Labor cost 3,000
Rent 1,500
Depreciation 2,500
Other fixed costs 3,200
Total $15,000

The company is currently producing and selling 144 windows annually and each window is sold for $140.00. The company is considering lowering the price to $125.00 for which management estimates this will increase sales to 200 windows. Materials and labor are the only variable costs. Under what situation should the company lower the price of its windows?

If total revenue exceeds totals costs under the new pricing
If incremental revenue exceeds the old revenue
If incremental profit is a positive number
If incremental costs decrease

Explanation / Answer

option 5:Total cost is not going to decrease , material and cost of labor will increase and rest of the costs are fixed cost Option 3:Revenue is increasing but so does cost, so this is also not a very good option Option 2:Incremental revenue is not always a preference Option1:This should always happen, to make a business sustainable, this condition was already meeting, so why will company will look for another option Option4: Is the most appropriate, if profit will increase. Value of shareholders will increase hence, This is most favorable option.

Related Questions

Navigate

• Browse (All)
• Browse
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.