Question - Price and cost for Warner Clothing:
Sales price: 15$ per unit
Variable costs: 3$ per unit
Fixed costs: 42000 per month
Assume that the company plans to sell 5000 units per month. Consider requirements b, c, d independently of each other:
a) What will be the operating profit?
b) What is the impact on operating profit if the sales price decreases by 10%? Increase by 20%?
c) What is the impact on operating profit if variable costs per unit decrease by 10%? Increase by 20%?
d) Suppose that fixed cost for the year are 10% lower than projected and variable cost per unit are 10% higher than projected. What impact will this cost changes have on operating profit for the year? Will profit go up or down and how much?