SLP Corporation produces and sells a single product for $15 per unit. Variable cost per unit is $6 and total fixed costs currently are $18,000. SLP's owner, Lee Cord, can decrease variable cost per unit to $4 if he increases total fixed costs by 20%, with no change in product price or demand. Lee normally sells 3,000 units each month.
a)Calculate total expected profit under current conditions.
b)Calculate total expected profit under the proposed new conditions.
c)Calculate the indifference point (in units)between the two alternatives.
d)If Lee expects his monthly sales (in units)to increase by 30% within two months, should he stay with his current cost structure or move to the proposed new structure? Justify your answer with appropriate computations.

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The Answer of SLP Corporation produces and sells a single product for $15 per unit. Variable cost per unit is $6 and total fixed costs currently are $18,000. SLP's owner, Lee Cord, can decrease variable cost per unit to $4 if he increases total fixed costs by 20%, with no change in product price or demand. Lee normally sells 3,000 units each month.
a)Calculate total expected profit under current conditions.
b)Calculate total expected profit under the proposed new conditions.
c)Calculate the indifference point (in units)between the two alternatives.
d)If Lee expects his monthly sales (in units)to increase by 30% within two months, should he stay with his current cost structure or move to the proposed new structure? Justify your answer with appropriate computations.

SLP Corporation Produces and Sells a Single Product for $15