Norwood Industries has annual fixed costs of $1.8 million. Unit variable costs are currently 55% of the unit selling price.
a) What annual revenue is required to break even?
b) What revenue would result in a loss of $100,000 in a year?
c) What annual revenue would produce an operating profit of $300,000?
d) Market research indicates that if prices are increased by 10%, total revenue will remain at the part c amount because the higher prices will be offset by reduced sales volume. Will the operating profit remain at $300,000? Present calculations to justify your answer.

Question

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The Answer of Norwood Industries has annual fixed costs of $1.8 million. Unit variable costs are currently 55% of the unit selling price.
a) What annual revenue is required to break even?
b) What revenue would result in a loss of $100,000 in a year?
c) What annual revenue would produce an operating profit of $300,000?
d) Market research indicates that if prices are increased by 10%, total revenue will remain at the part c amount because the higher prices will be offset by reduced sales volume. Will the operating profit remain at $300,000? Present calculations to justify your answer.

Norwood Industries Has Annual Fixed Costs of $1