Derby Phones isconsidering the introduction of a new model of headphones with thefollowing price and cost characteristics:
| | | |
| Sales price | $ | 17 | per unit |
| Variablecosts | | 8 | per unit |
| Fixed costs | | 20,000 | per month |
|
Assume that theprojected number of units sold for the month is 6,500. Considerrequirements (b), (c), and (d)independently of each other.
Required:
a.What will the operating profit be?
b.What is the impact on operating profit if the sales price decreasesby 10 percent? Increases by 20 percent? (Do not roundintermediate calculations.)
c.What is the impact on operating profit if variable costs per unitdecrease by 10 percent? Increase by 20 percent? (Do notround intermediate calculations.)
d.Suppose that fixed costs for the year are 10 percent lower thanprojected, and variable costs per unit are 10 percent higher thanprojected. What impact will these cost changes have on operatingprofit for the year? Will profit go up? Down? By how much?(Do not round intermediate calculations.)
