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In: Accounting

Clipper Company sells two types of nail clippers. One focuses on the economy oriented customer and...

Clipper Company sells two types of nail clippers. One focuses on the economy oriented customer and the other aims to satisfy the high-end clientele. The economy clipper costs $5 and has a sales price of $9. The high-end model costs $9 and sales for $15. Fixed costs associated with this product line amount to $35,880. Economy clippers constitute 70 percent of the market with the remaining 30 percent being high-end clippers. Assume Clipper Company currently sells 10,500 units of clippers and earns a $12,420 profit. Management believes the profitability can be improved by shifting the sales mix to 60 percent share for the economy line and 40 percent for the high-end line. The company believes it can continue to sell a total of 10,500 under the new sales mix. If management is able to accomplish the shift in sales mix

Multiple Choice

  • profit will increase by $2,100.

  • profit will increase by $14,520.

  • profit will decrease $12,420.

  • profit will not be affected. Please show formulas

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Expert Solution

ekkarill92 answered 2 years ago
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