Rooney Company produces a product that has a variable cost of $21 per unit and a sales price of $61 per unit. The company's annual fixed costs total $710,000. It had net income of $270,000 in the previous year. In an effort to increase the company's market share. management is considering lowering the selling price to $53 per unit. Required a. If Rooney desires to maintain net income of $270,000, how many additional units must it sell to justify the price decline? b. Assume that in addition to lowering its selling price to $53, Rooney also desires to increase its net income by $76,000. Determine the number of units the company must sell to earn the desired income.
Rooney Company produces a product that has a variable cost of $21 per unit and a sales price of $61 per unit. The company's annual fixed costs total $710,000. It had net income of $270,000 in the previous year. In an effort to increase the company's market share. management is considering lowering the selling price to $53 per unit. Required a. If Rooney desires to maintain net income of $270,000, how many additional units must it sell to justify the price decline? b. Assume that in addition to lowering its selling price to $53, Rooney also desires to increase its net income by $76,000. 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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Rooney Company produces a product that has a variable cost of $21 per unit and a sales price of $61 per unit. The company's annual
fixed costs total $710.000. It had net income of $270,000 in the previous year. In an effort to increase the company's market share.
management is considering lowering the selling price to $53 per unit.
Required
a. If Rooney desires to maintain net income of $270,000, how many additional units must it sell to justify the price decline?
b. Assume that in addition to lowering its selling price to $53, Rooney also desires to increase its net income by $76,000. 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 Rooney desires to maintain net income of $270,000, how many additional units must it sell to justify the price
decline?
Additional units required
units
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