Question

Kitchen Korner competes with Sur Le Table for sales of quality kitchen knives. Kitchen Korner currently sells 22,000 knives per month for $40 each. The variable cost per knife is $20, and fixed costs are $300,000. Kitchen Korner is considering increasing the price of its knives to $60 each. If the price is changed, how many knives will Kitchen Korner need to sell for profit to remain the same as before the price change?

A. 14,667

B. 13,500

C. 17,600

D. 11,000

Answer 1

Particulars	Original selling price	Revised selling price
Selling price	$            40	$         60
Less variable cost	$          (20)	$       (20)
Contribution	$            20	$         40
Units sold	$    22,000
Total contribution	$ 440,000
Less fixed cost	$(300,000)
Net profit	$ 140,000

Particulars
Desired Net profit	$ 140,000
Add Fixed cost	$ 300,000
Total contribution required	$ 440,000
Contribution per unit	$            40
No. of units to be sold	$    11,000

Hence, Option D is correct.

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