Willow Hearth Winery makes local wines. The prior-year, unit selling price for a bottle of its red wine was $30 with a unit variable cost of $14 and a unit fixed cost of $10 based on prior production and sales of 5,000 bottles. For the current year, Willow Hearth Winery is planning to increase the unit selling price to $34 since the unit variable cost increased by 20%.
a) Assuming that at the higher unit selling price, the company is still able to sell 5,000 bottles, what profit will Willow Hearth Winery expect to recognize for the current year?
b) Assuming that at the unit higher selling price, the company feels that sales may decrease to 4,500 bottles, what profit will Willow Hearth Winery expect to recognize for the current year?

Question

Willow Hearth Winery makes local wines. The prior-year, unit selling price for a bottle of its red wine was $30 with a unit variable cost of $14 and a unit fixed cost of $10 based on prior production and sales of 5,000 bottles. For the current year, Willow Hearth Winery is planning to increase the unit selling price to $34 since the unit variable cost increased by 20%. 
a) Assuming that at the higher unit selling price, the company is still able to sell 5,000 bottles, what profit will Willow Hearth Winery expect to recognize for the current year? 
b) Assuming that at the unit higher selling price, the company feels that sales may decrease to 4,500 bottles, what profit will Willow Hearth Winery expect to recognize for the current year?

Quizplus · Accepted Answer

The Answer of Willow Hearth Winery makes local wines. The prior-year, unit selling price for a bottle of its red wine was $30 with a unit variable cost of $14 and a unit fixed cost of $10 based on prior production and sales of 5,000 bottles. For the current year, Willow Hearth Winery is planning to increase the unit selling price to $34 since the unit variable cost increased by 20%. 
a) Assuming that at the higher unit selling price, the company is still able to sell 5,000 bottles, what profit will Willow Hearth Winery expect to recognize for the current year? 
b) Assuming that at the unit higher selling price, the company feels that sales may decrease to 4,500 bottles, what profit will Willow Hearth Winery expect to recognize for the current year?

Willow Hearth Winery Makes Local Wines