Malone Company produces a product that has a variable cost of $54 per unit and a sales price of $79 per unit. The company's annual fixed costs total $750,000. It had net income of $250,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $74 per unit. Required a. If Malone desires to maintain net income of $250,000, how many additional units must it sell to justify the price decline? b. Assume that in addition to lowering its selling price to $74, Malone also desires to increase its net income by $50,000. Determine the number of units the company must sell to earn the desired income.
Malone Company produces a product that has a variable cost of $54 per unit and a sales price of $79 per unit. The company's annual fixed costs total $750,000. It had net income of $250,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $74 per unit. Required a. If Malone desires to maintain net income of $250,000, how many additional units must it sell to justify the price decline? b. Assume that in addition to lowering its selling price to $74, Malone also desires to increase its net income by $50,000. Determine the number of units the company must sell to earn the desired income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 3-14A (Static) Conducting sensitivity analysis using the equation method LO 3-5
Malone Company produces a product that has a variable cost of $54 per unit and a sales price of $79 per unit. The
company's annual fixed costs total $750,000. It had net income of $250,000 in the previous year. In an effort to increase the
company's market share, management is considering lowering the selling price to $74 per unit.
Required
a. If Malone desires to maintain net income of $250,000, how many additional units must it sell to justify the price decline?
b. Assume that in addition to lowering its selling price to $74, Malone also desires to increase its net income by $50,000.
Determine the number of units the company must sell to earn the desired income.
Complete this question by entering your answers in the tabs below.
Required A Required B
If Malone desires to maintain net income of $250,000, how many additional units must it sell to justify the price decline?
Additional units required
units
< Required A
Required B
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