Scholes Systems supplies a particular type of office chair to large retailers such as Target, Costco, and Office Max. Scholes is concerned about the possible effects of inflation on its operations. Presently, the company sells 87,000 units for $55 per unit. The variable production costs are $21, and fixed costs amount to $1,470,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year. Of the $21 variable costs, 60 percent are from labor and 20 percent are from materials. Variable overhead costs are expected to increase by 25 percent. Sales prices cannot increase more than 10 percent. It is also expected that fixed costs will rise by 7 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 10 percent during the year. Required: a. Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. b. Compute the volume of sales and the dollar sales level necessary to provide the 10 percent increase in profits, assuming that the maximum price increase is implemented. c. If the volume of sales were to remain at 87,000 units, what price change would be required to attain the 10 percent increase in profits? Calculate the new price. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.) Required A Required B Required C Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.) Volume in units Sales Required A Required B Required C Compute the volume of sales and the dollar sales level necessary to provide the 10 percent increase in profits, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.) Volume in units Sales Required A Required B Required C If the volume of sales were to remain at 87,000 units, what price change would be required to attain the 10 percent increase in profits? (Round intermediate calculations of unit cost and final answer to 2 decimal places.) New price

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...
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Scholes Systems supplies a particular type of office chair to large retailers such as Target, Costco, and Office Max. Scholes is
concerned about the possible effects of inflation on its operations. Presently, the company sells 87,000 units for $55 per unit. The
variable production costs are $21, and fixed costs amount to $1,470,000. Production engineers have advised management that they
expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year. Of the $21 variable costs,
60 percent are from labor and 20 percent are from materials. Variable overhead costs are expected to increase by 25 percent. Sales
prices cannot increase more than 10 percent. It is also expected that fixed costs will rise by 7 percent as a result of increased taxes and
other miscellaneous fixed charges.
The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits
must increase by 10 percent during the year.
Required:
a. Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum
price increase is implemented.
b. Compute the volume of sales and the dollar sales level necessary to provide the 10 percent increase in profits, assuming that the
maximum price increase is implemented.
c. If the volume of sales were to remain at 87,000 units, what price change would be required to attain the 10 percent increase in
profits? Calculate the new price.
Complete this question by entering your answers in the tabs below.
Required A
Required B Required C
Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the
maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in
units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.)
Required A
Required B Required C
Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the
maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in
units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.)
Volume in units
Sales
Required A
Required B Required C
Compute the volume of sales and the dollar sales level necessary to provide the 10 percent increase in profits, assuming that
the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in
units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.)
Volume in units
Sales
Required A Required B Required C
If the volume of sales were to remain at 87,000 units, what price change would be required to attain the 10 percent increase
in profits? (Round intermediate calculations of unit cost and final answer to 2 decimal places.)
New price
Transcribed Image Text:Scholes Systems supplies a particular type of office chair to large retailers such as Target, Costco, and Office Max. Scholes is concerned about the possible effects of inflation on its operations. Presently, the company sells 87,000 units for $55 per unit. The variable production costs are $21, and fixed costs amount to $1,470,000. Production engineers have advised management that they expect unit labor costs to rise by 20 percent and unit materials costs to rise by 15 percent in the coming year. Of the $21 variable costs, 60 percent are from labor and 20 percent are from materials. Variable overhead costs are expected to increase by 25 percent. Sales prices cannot increase more than 10 percent. It is also expected that fixed costs will rise by 7 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 10 percent during the year. Required: a. Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. b. Compute the volume of sales and the dollar sales level necessary to provide the 10 percent increase in profits, assuming that the maximum price increase is implemented. c. If the volume of sales were to remain at 87,000 units, what price change would be required to attain the 10 percent increase in profits? Calculate the new price. Complete this question by entering your answers in the tabs below. Required A Required B Required C Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.) Required A Required B Required C Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.) Volume in units Sales Required A Required B Required C Compute the volume of sales and the dollar sales level necessary to provide the 10 percent increase in profits, assuming that the maximum price increase is implemented. (Do not round intermediate calculations. Round up your answer for "Volume in units" to the nearest whole number and round your answer for "Sales" to the nearest whole dollar amount.) Volume in units Sales Required A Required B Required C If the volume of sales were to remain at 87,000 units, what price change would be required to attain the 10 percent increase in profits? (Round intermediate calculations of unit cost and final answer to 2 decimal places.) New price
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