Derby Phones is considering the introduction of a new model of headphones with the following price...

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Accounting

Derby Phones is considering the introduction of a new model ofheadphones with the following price and cost characteristics.
Sales price $ 21 per unit
Variable costs 9 per unit
Fixed costs 26,000 per month
Assume that the projected number of units sold for the month is6,000. Consider requirements (b), (c), and(d) independently of each other.
Required:
a. What will the operating profit be?
b. What is the impact on operating profit ifthe sales price decreases by 10 percent? Increases by 20percent?
c. What is the impact on operating profit ifvariable costs per unit decrease by 10 percent? Increase by 20percent?
d. Suppose that fixed costs for the year are 10percent lower than projected, and variable costs per unit are 10percent higher than projected. What impact will these cost changeshave on operating profit for the year? Will profit go up? Down? Byhow much?

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3.8 Ratings (651 Votes)

a Operating profit Sales price variable cost units Fixed cost 21 9 6000 26000 72000 26000 46000 b Sales price decrease by 10 New sales price 21 09 1890 Operating profit Sales price See Answer

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Sales price	$	21	per unit
Variable costs		9	per unit
Fixed costs		26,000	per month