Herrell Corporation manufactures numerous products, one of which is called Delta-11. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. If Herrell increases the price of Delta-11 to $30.45, what percentage change in unit sales would provide the same net operating income as is currently being earned at a price of $29.00? (Your answer should be rounded to the nearest 0.1%.)

Question

Herrell Corporation manufactures numerous products, one of which is called Delta-11. The company has provided the following data about this product:  Assume that the total traceable fixed expense does not change. If Herrell increases the price of Delta-11 to $30.45, what percentage change in unit sales would provide the same net operating income as is currently being earned at a price of $29.00? (Your answer should be rounded to the nearest 0.1%.)

Quizplus · Accepted Answer

Profit = (P − V) × Q − Fixed expenses
$90,000 = ($30.45 per unit − $19.00 per unit) × Q − $1,010,000
$1,100,000 = ($30.45 per unit − $19.00 per unit) × Q
$1,100,000 = ($11.45 per unit) × Q
Q = $1,100,000 ÷ $11.45 per unit = 96,070 units (rounded up)
Percentage change in unit sales = (96,070 units − 110,000 units) ÷ 110,000 units = (12.7)% (rounded)

Herrell Corporation Manufactures Numerous Products, One of Which Is Called