Outback Outfitters sells recreational equipment. One of the company\'s products,

Question

Outback Outfitters sells recreational equipment. One of the company's products, a small camp stove, sells for $110 per unit. Variable expenses are $77 per stove, and fixed expenses associated with the stove total $151,800 per month.

At present, the company is selling 11,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. How many stoves would have to be sold at the new selling price to yield a minimum net operating income of $71,000 per month?(Round your answer to the nearest whole number.)

At present, the company is selling 11,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. How many stoves would have to be sold at the new selling price to yield a minimum net operating income of $71,000 per month?(Round your answer to the nearest whole number.)

Explanation / Answer

Hi,

Please find the answer as follows:

Current Selling Price = 110

Revised Selling Price = 110 - 110*.10 = 99

Contribution = 99 - 77 = 22 per unit

Sales = Fixed Cost + Desired Profit/Contribution = (151800 + 71000)/22 = 10127 units

Answer is 10127 stoves.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.