Chruch Corporation manufactures numerous products, one of which is called Tau-42. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. If Chruch decreases the price of Tau-42 to $68.62, what percentage change in unit sales would provide the same net operating income as is currently being earned at a price of $73? (Round your "Percentage" answers to 1 decimal place.)
A) 4.9%
B) 23.5%
C) -18.6%
D) -31.5%

Question

Chruch Corporation manufactures numerous products, one of which is called Tau-42. The company has provided the following data about this product:  Assume that the total traceable fixed expense does not change. If Chruch decreases the price of Tau-42 to $68.62, what percentage change in unit sales would provide the same net operating income as is currently being earned at a price of $73? (Round your "Percentage" answers to 1 decimal place.)
A) 4.9% 
B) 23.5% 
C) -18.6% 
D) -31.5%

Quizplus · Accepted Answer

First, we need to calculate the current unit contribution margin:
$73 – ($32 + $17 + $10) = $14
Next, we need to calculate the current unit sales volume:
($795,000 + $180,000) / $14 = 63,000 units
Then, we need to calculate the current net operating income:
63,000 units × $14 = $882,000
Now, we can use the formula to calculate the percentage change in unit sales:
[($882,000 + $180,000) / ($14 × $68.62)] – 1 = 0.235
So, the percentage change in unit sales would be 23.5% to provide the same net operating income as is currently being earned at a price of $73.

Chruch Corporation Manufactures Numerous Products, One of Which Is Called