Knoll,Inc.currently sells 15,000 units a month for $50 each,has variable costs of $20 per unit,and fixed costs of $300,000.Knoll is considering increasing the price of its units to $60 per unit.If the price is changed,how many units will Knoll need to sell for profit to remain the same as before the price change?
A)10,000
B)11,250
C)12,000
D)12,500

Question

Quizplus · Accepted Answer

To keep profit the same, we first calculate the current profit: (Selling Price - Variable Cost) * Units Sold - Fixed Costs = ($50 - $20) * 15,000 - $300,000 = $450,000 - $300,000 = $150,000. With the new selling price of $60, the new equation for the same profit is: ($60 - $20) * New Units Sold - $300,000 = $150,000. Simplifying, we get $40 * New Units Sold = $450,000, so New Units Sold = $450,000 / $40 = 11,250 units.

Knoll,IncCurrently Sells 15,000 Units a Month for $50 Each,has Variable