Barney & Robles plans to produce 50,000 books next year at a total cost of $1,900,000.The fixed costs total $120,000.Selling price per book is $65.00.Management is considering lowering the price to $62.00 per unit, and feels that this action will cause sales to climb to 54,000 books.What is the incremental revenue generated if 54,000 units are sold?

Question

Quizplus · Accepted Answer

To find the incremental revenue, we need to first calculate the revenue at the current price and compare it with the revenue at the new price.

At the current selling price of $65.00 per book, the total revenue for producing 50,000 books is:

Total revenue = Selling price * Number of books sold
Total revenue = $65.00/book * 50,000 books
Total revenue = $3,250,000

Now, if the selling price is lowered to $62.00 per book and the sales increase to 54,000 books, the total revenue will be:

Total revenue = Selling price * Number of books sold
Total revenue = $62.00/book * 54,000 books
Total revenue = $3,348,000

The incremental revenue is the difference between the two revenues:

Incremental revenue = New revenue - Current revenue
Incremental revenue = $3,348,000 - $3,250,000
Incremental revenue = $98,000

Therefore, the best choice is B as it represents the incremental revenue generated if 54,000 units are sold.

Barney & Robles Plans to Produce 50,000 Books Next Year