Buzby Corporation manufactures numerous products, one of which is called Epsilon39. The company has provided the following data about this product:
Required:
a. Management is considering decreasing the price of Epsilon39 by 5%, from $43.00 to $40.85. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 60,000 units to 66,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Epsilon39 earn at a price of $40.85 if this sales forecast is correct?
b. Assuming that the total traceable fixed expense does not change, how many units of Epsilon39 would Buzby need to sell at a price of $40.85 to earn the same net operating income that it currently earns at a price of $43.00? (Round your answer up to the nearest whole number.)

Question

Buzby Corporation manufactures numerous products, one of which is called Epsilon39. The company has provided the following data about this product:
  Required:
a. Management is considering decreasing the price of Epsilon39 by 5%, from $43.00 to $40.85. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 60,000 units to 66,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Epsilon39 earn at a price of $40.85 if this sales forecast is correct?
b. Assuming that the total traceable fixed expense does not change, how many units of Epsilon39 would Buzby need to sell at a price of $40.85 to earn the same net operating income that it currently earns at a price of $43.00? (Round your answer up to the nearest whole number.)

Quizplus · Accepted Answer

The Answer of Buzby Corporation manufactures numerous products, one of which is called Epsilon39. The company has provided the following data about this product:
  Required:
a. Management is considering decreasing the price of Epsilon39 by 5%, from $43.00 to $40.85. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 60,000 units to 66,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Epsilon39 earn at a price of $40.85 if this sales forecast is correct?
b. Assuming that the total traceable fixed expense does not change, how many units of Epsilon39 would Buzby need to sell at a price of $40.85 to earn the same net operating income that it currently earns at a price of $43.00? (Round your answer up to the nearest whole number.)

Buzby Corporation Manufactures Numerous Products, One of Which Is Called