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Exercise 3-32(Static) Basic Decision Analysis Using CVP (LO 3-1) Grove Audio is considering the...

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Accounting

Exercise 3-32(Static) Basic Decision Analysis Using CVP (LO 3-1)
Grove Audio is considering the introduction of a new model of wireless speakers with the following price and cost characteristics.
Assume that the projected number of units sold for the year is 3,750. Consider requirements (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 decreases by 20 percent? Increases by 10 percent?
c. What is the impact on operating profit if variable costs per unit decrease by 10 percent? Increase by 20 percent?
d. Suppose that fixed costs for the year are 20 percent lower than projected, and variable costs per unit are 10 percent higher than
projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much?
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