CVP analysis giving decision if the price is reduced.
Techno's marketing research shows that if they reduce their selling price by $1.46 (new selling price $12.49), their sales will increase by 15%. If they still desire to earn a profit of $106,000 next year, does this price reduction seem like a financially wise idea? Why or why not?
CVP analysis involves computation of break even point.
Heister Corporation produces class rings to sell to college and high school students. These rings sell for $75 each, and cost $35 each to produce. Heister has fixed costs of $50,000.
a) Calculate Heister's break-even point.
b) How much profit (loss) will Heister have if it sells 1,000 rings? 8,000 rings?
c) Heister's president, J. R. D'Angelo, expects an annual profit of $100,000. How many rings must be sold to attain this profit?