Question - One product produced and sold by big boy toys is an atv gun rack for which 2014 projections are as follows:
projuected volume in units - 120000
sales price per unit - 60
variable production cost per unit - 25
variable selling cost per unit - 12
fixed production cost - 805000
fixed selling and admin costs - 435000
a. Compute the projected pre-tax profit to be earned on the atv jun rack during 2014.
b. Corporate management estimates that unit volume could be increased by 20% if sales price were decreased by 10%. How would such a change affect the profit level projected in (a)?
c. Rather than cutting the sales price, management is considering holding the sales price at the projected level and increasing advertising by 185000. Such a change would increase volume by 20%. how would the level of profit under this alternative compare to the profit projected in (a)?