Question 52 of 55 The new CEO of Company A has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information: Number of units produced and sold 500,000 units Selling price P10 P6 Variable cost per unit Fixed cost for the year P1,500,000 The CEO has a plan to reduce fixed costs by P200,000. However, the reduction in fixed cost will result in lower product quality resulting in 15% fewer units being sold compared to before the change. To temper the sales drop from 15% to 8%, the CEO plans to reduce the selling price by P1. If the CEO institutes the changes and wants to maintain its current rate of profit on sales, what should be the target variable cost per unit?
Question 52 of 55 The new CEO of Company A has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information: Number of units produced and sold 500,000 units Selling price P10 P6 Variable cost per unit Fixed cost for the year P1,500,000 The CEO has a plan to reduce fixed costs by P200,000. However, the reduction in fixed cost will result in lower product quality resulting in 15% fewer units being sold compared to before the change. To temper the sales drop from 15% to 8%, the CEO plans to reduce the selling price by P1. If the CEO institutes the changes and wants to maintain its current rate of profit on sales, what should be the target variable cost per unit?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 52 of 55
The new CEO of Company A has asked for a variety of information about the operations of the firm from last year. The
CEO is given the following information:
Number of units produced and sold 500,000 units
Selling price
P10
Variable cost per unit
P6
Fixed cost for the year
P1,500,000
The CEO has a plan to reduce fixed costs by P200,000. However, the reduction in fixed cost will result in lower product
quality resulting in 15% fewer units being sold compared to before the change. To temper the sales drop from 15% to 8%,
the CEO plans to reduce the selling price by P1. If the CEO institutes the changes and wants to maintain its current rate of
profit on sales, what should be the target variable cost per unit?
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