Question
In: Accounting
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors....
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors. The company has collected the following price and cost characteristics:
| Sales price | $ | 15 | per unit |
| Variable costs | 3 | per unit | |
| Fixed costs | 42,000 | per month | |
|
If that fixed costs for the year are 10 percent lower than projected, and variable costs per unit are 10 percent higher than projected. What impact will these cost changes have on operating profit for the year? Will profit go up? Down? By how much? |
|||
Solutions
Expert Solution
Profit for the year will go UP by $2,700
Working
| Current | Proposed | Change | |
| Units | 5000 | 5000 | |
| Sales price | $ 15.00 | $ 15.00 | |
| Variable cost | $ 3.00 | $ 3.30 | |
| Fixed cost | $ 42,000.00 | $ 37,800.00 | |
| Sales revenue | $ 75,000.00 | $ 75,000.00 | |
| Variable costContribution margin | $ 15,000.00 | $ 16,500.00 | |
| Contribution margin | $ 60,000.00 | $ 58,500.00 | |
| Fixed cost | $ 42,000.00 | $ 37,800.00 | |
| Operating income | $ 18,000.00 | $ 20,700.00 | $ 2,700.00 |
ekkarill92 answered 1 year agoRelated Solutions
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors....
Warner Clothing is considering the introduction of a new
baseball cap for sales by local vendors. The company has collected
the following price and cost characteristics.
Sales price
$
17
per unit
Variable costs
3
per unit
Fixed costs
756,000
per year
Assume that the company plans to sell 7,000 units per month.
Consider requirements (b), (c), and (d)
independently of each other.
Required:
d. Suppose that fixed costs for the year are 10
percent lower than projected, and variable...
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors....
Warner Clothing is considering the introduction of a new
baseball cap for sales by local vendors. The company has collected
the following price and cost characteristics.
Sales price
$
17
per unit
Variable costs
3
per unit
Fixed costs
63,000
per month
Assume that the company plans to sell 7,000 units per month.
Consider requirements (b), (c), and (d)
independently of each other.
Required:
d. Suppose that fixed costs for the year are 10
percent lower than projected, and variable...
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors....
Warner Clothing is considering the introduction of a new
baseball cap for sales by local vendors. The company has collected
the following price and cost characteristics:
Sales price
$
15
per unit
Variable costs
5
per unit
Fixed costs
50,000
per month
Required:
a. What number must Warner sell per month to
break even?
b. What number must Warner sell per month to
make an operating profit of $34,000?
Assume that the company plans to sell 9,000 units per month....
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors....
Warner Clothing is considering the introduction of a
new baseball cap for sales by local vendors. The company has
collected the following price and cost characteristics:
Sales price$12per unitVariable
costs 2per unitFixed costs 40,000per month
Assume that the company plans to sell 6,000 units per
month. Consider requirements (b), (c), and (d)
independently of each other.
What is the impact on operating profit if variable
costs per unit decrease by 15 percent? Increase by 30
percent?
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors. The company has collected the following price and cost characteristics:
Warner Clothing is considering the introduction of a new baseball cap for sales by local vendors. The company has collected the following price and cost characteristics:
Sales price
$
16
per unit
Variable costs
4
per unit
Fixed costs
48,000
per month
2.
value:1.00 points
Required information
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