Redlands Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40. f. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by 10%. Determine if Redlands should increase its selling price. (Ignore income taxes.) g. Assume that Redlands currently sells 30 units and has a 40% income tax rate. The firm estimates that a $25 increase in fixed cost from automating the plant would lower variable costs to $2 per unit. Determine if Redlands should change its cost structure. f. Current Alternative Sales revenue Variable cost Contribution margin Fixed cost Net income g. Current Alternative Sales revenue Variable cost Contribution margin Fixed cost Pretax income Income tax expense Net income
Redlands Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40.
f. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by 10%. Determine if Redlands should increase its selling price. (Ignore income taxes.)
g. Assume that Redlands currently sells 30 units and has a 40% income tax rate. The firm estimates that a $25 increase in fixed cost from automating the plant would lower variable costs to $2 per unit. Determine if Redlands should change its cost structure.
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