1. Integrated Financial. A company is considering a price reduction of 25 percent on its entire line of bicycles. Given the following information, calculate the sales volume (in dollars) needed to obtain a 5 percent profit (as a percent of sales). (Note: unit variable and fixed costs will remain constant)
Previous Year Financials
Sales volume 150,000 units
Sales $18,000,000
Contribution Margin .40 (40%)
Fixed Costs $5,580,000
Net Profits $ 720,000
2. If a company wishes to obtain $100,000 profit on sales this coming year, what level of sales need they obtain given the following previous year expense/price information (which is expected to remain constant for the upcoming year):
Advertising $1,000,000
Selling &Administrative Exp 1,600,000
Plant and Equipment expense 2,000,000
Cost of goods sold 560,000
(Based on volume of 224,000 units)
Selling Price $20.00
3. Using the information in question 2 above, what would the company need in sale dollars to achieve the $100,000 profit level if they reduced price by 8 percent?