Zachary Company produces a product that has a variable cost of $28 per unit and a sales price of $68 per unit. The company's annual fixed costs total $770,000. It had a net income of $330,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $60 per unit. A. If Zachary desires to maintain a net income of $330,000, how many additional units must it sell to justify the price decline? B. Assume that in addition to lowering its selling price to $60, Zachary also desires to increase its net income by $84,000. Determine the number of units the company must sell to earn the desired income.

Zachary Company produces a product that has a variable cost of $28 per unit and a sales price of $68 per unit. The company's annual fixed costs total $770,000. It had a net income of $330,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $60 per unit. A. If Zachary desires to maintain a net income of $330,000, how many additional units must it sell to justify the price decline? B. Assume that in addition to lowering its selling price to $60, Zachary also desires to increase its net income by $84,000. Determine the number of units the company must sell to earn the desired income.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...

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