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and this one too:
BW Co produces Item S and its information per unit: variable cost $17; selling price $30. The budget per month information: sales volume 25,000 units; fixed costs $250,000. BW plans to reduce price to $27 so sales is up and monthly profit is up 10%.Answer: Sales volume required at new selling price to increase profit by 10% is 43,250
You have either mistyped the answer (or the question) or the answer in your book is wrong.
The current profit is (25,000 x (30 – 17)) – 250,000 = $75,000.
For the profit to be 10% higher, they therefore need the profit to be $82,500.
The fixed costs will remain $250,000, and so they need a contribution of $332,500.
The contribution per unit will be 27 – 17 = $10. Therefore they need to sell
332,500/10 = 33,250 unitsi got this question from another practice site,and i got the answer as 33250 units, but i think its their mistake. anyways thank you sir.
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