Knoll, Inc. currently sells 31,000 units a month for $34 each, has variable costs of $23 per unit, and fixed costs of $120,000. Knoll is considering increasing the price of its units to $37 per unit. This will not affect costs, but demand is expected to drop 10%. Should Knoll increase the price of its product?**Multiple Choice:**1. ○ Yes, profit will increase $221,000.2. ○ Yes, profit will increase $49,600.3. ○ No, profit will decrease $49,600.4. ○ No, profit will decrease $221,000.

Contribution margin: The difference between the sales and the variable costs is called the…

Answered: Knoll, Inc. currently sells 31,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Hello please help with the problem below. Thanks Last year’s operating income for the Barnum company was $30,000. The selling price during the year was $15 per unit. The total variable costs were $180,000 and total fixed costs were $90,000. The sales manager wants to increase the selling price next year by 15% although she knows that the number of units sold would likely be reduced by 10%. If her proposal is adopted and her assumption about volume of sales is correct, what would the new operating income be?
Totally Tanked, Inc. sells tank tops. The firm is considering making some changes in order to achieve its goal of increasing its profit. If it makes no changes, the company anticipates the following for the coming year: # of tank tops to be sold 3,000,000 Selling price per tank top $20 Variable expense per tank top $8 Fixed expenses for the year $20,000,000 Maria, one of the company’s managers suggests the following: “I think if we cut our price to $17 a tank top, we will increase our sales to 3,700,000 tank tops. I think that will help us achieve our goal”. Question: Prepare a contribution margin income statement (CMIS) for each of the two scenarios below: A) The company makes no changes B)The company implements Maria’s suggestion.
H2. A clothing manufacturer is considering whether to add hoodies to its range of products. The hoodies would sell for $45 each and the company expects to sell 10,000 units per year. Selling hoodies, however, would cause sales of conventional jumpers to decrease by 1,000 units per year. The jumpers sell for $43 per unit. The variable costs of production are $25 per unit for hoodies and $20 per unit for jumpers. If the company adds hoodies to its range of products, fixed costs will increase by $56,000 per year and annual depreciation will increase by $21,000. What is the incremental operating cash flow from selling hoodies, if the corporate tax rate is 30%? Please show proper step by step calculation
The Poseidon Swim Company produces swim trunks. The average selling price for one of their swim trunks is $64.63. The variable cost per unit is $21.75, Poseidon Swim has average fixed costs per year of $7,993. Assume that current level of sales is 314 units. What will be the resulting percentage change in EBIT if they expect units sold to changes by -4.2 percent? (You should calculate the degree of operating leverage first). (Write the percentage sign in the "units" box). Round the answer to two decimal places.
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