Powel Corporation manufactures numerous products, one of which is called Gamma54. The company has provided the following data about this product:
Required:
a. What net operating income is the company earning now on its sales of Gamma54?
b. Management is considering increasing the price of Gamma54 by 10%, from $16.00 to $17.60. The company's marketing managers estimate that this price hike would decrease unit sales by 15%, from 180,000 units to 153,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Gamma54 earn at a price of $17.60 if this sales forecast is correct?
c. Assuming that the total traceable fixed expense does not change, if Powel increases the price of Gamma54 to $17.60, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $16.00? (Round your answer to the nearest one-tenth of a percent.)

Question

Powel Corporation manufactures numerous products, one of which is called Gamma54. The company has provided the following data about this product:
  Required:
a. What net operating income is the company earning now on its sales of Gamma54?
b. Management is considering increasing the price of Gamma54 by 10%, from $16.00 to $17.60. The company's marketing managers estimate that this price hike would decrease unit sales by 15%, from 180,000 units to 153,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Gamma54 earn at a price of $17.60 if this sales forecast is correct?
c. Assuming that the total traceable fixed expense does not change, if Powel increases the price of Gamma54 to $17.60, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $16.00? (Round your answer to the nearest one-tenth of a percent.)

Quizplus · Accepted Answer

The Answer of Powel Corporation manufactures numerous products, one of which is called Gamma54. The company has provided the following data about this product:
  Required:
a. What net operating income is the company earning now on its sales of Gamma54?
b. Management is considering increasing the price of Gamma54 by 10%, from $16.00 to $17.60. The company's marketing managers estimate that this price hike would decrease unit sales by 15%, from 180,000 units to 153,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Gamma54 earn at a price of $17.60 if this sales forecast is correct?
c. Assuming that the total traceable fixed expense does not change, if Powel increases the price of Gamma54 to $17.60, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $16.00? (Round your answer to the nearest one-tenth of a percent.)

Powel Corporation Manufactures Numerous Products, One of Which Is Called