Question

7.Cherokee Company sells a single product that has variable costs of $10 per unit. Fixed costs...

7.Cherokee Company sells a single product that has variable costs of $10 per unit. Fixed costs will be $700,000 across all levels of sales shown.

                              Units Sold                               Price per Unit

                                 80,000                                             $35

                                 90,000                                             $33

                               100,000                                             $31

                               110,000                                             $30

                               120,000                                             $28

What price would Cherokee charge to maximize profit? Post full calculation

Homework Answers

Answer #1

Solution:

Profit (if Price is $35) = Units Sold* (Sales price - Variable cost) - Fixed Costs = 80,000*($35-$10) - $700,000 = $1,300,000

Profit (if Price is $33) = 90,000*($33-$10) - $700,000 = $1,370,000

Profit (if Price is $31) = 100,000*($31-$10) - $700,000 = $1,400,000

Profit (if Price is $30) = 110,000*($30-$10) - $700,000 = $1,500,000

Profit (if Price is $28) = 120,000*($28-$10) - $700,000 = $1,460,000

Highest profit is $1,500,000 at the level of 110,000 unit sold at a price of $30 per unit.

Therefore, Price to be charged to maximize profit = $30 per unit

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cooper Company sells a product at $50 per unit that has unit variable costs of $20....
Cooper Company sells a product at $50 per unit that has unit variable costs of $20. The company's break-even sales point in sales dollars is $150,000. How much profit will the company make if it sells 4,000 units? A. $210,000 B. $120,000 C. $60,000 D. $30,000
ZBC, Inc. sells a single product for $10 per unit. Variable costs are $5 per unit...
ZBC, Inc. sells a single product for $10 per unit. Variable costs are $5 per unit and fixed         costs are $2,000.   A - Calculate the break-even point in units. B - How many units must be sold to earn $10,000 before income tax?
Cantor Products sells a product for $85. Variable costs per unit are $35, and monthly fixed...
Cantor Products sells a product for $85. Variable costs per unit are $35, and monthly fixed costs are $235,000. a. What is the break-even point in units? b. What unit sales would be required to earn a target profit of $330,000? c. Assume they achieve the level of sales required in part b, what is the degree of operating leverage? (Round your answer to 3 decimal places.)    d. If sales decrease by 30% from that level, by what percentage...
Manufacturing Ltd produces and sells a single product. Fixed costs are ​£360,000 per year and the​...
Manufacturing Ltd produces and sells a single product. Fixed costs are ​£360,000 per year and the​ break-even point of the business is 50,000 units. The profit each year is ​£290,000 Each product sells for ​£35 . ​Calculate: 1.The variable cost per unit 2.The number of units sold each year 3.The margin of safety
Tory Company sells a single product. Troy estimates demand and costs at various activity levels as...
Tory Company sells a single product. Troy estimates demand and costs at various activity levels as follows: Units Sold Price Total Variable Costs Fixed Costs 120,000 $48 $3,000,000 $1,000,000 154,500 $45 $3,500,000 $1,000,000 160,000 $40 $4,000,000 $1,000,000 180,000 $35 $4,500,000 $1,000,000 200,000 $30 $5,000,000 $1,000,000 How much profit will Troy have if a price of $45 is charged?
Lights Manufacturing produces a single product that sells for $ 150$150. Variable costs per unit equal...
Lights Manufacturing produces a single product that sells for $ 150$150. Variable costs per unit equal $ 50$50. The company expects total fixed costs to be $ 80 comma 000$80,000 for the next month at the projected sales level of 1 comma 0001,000 units. What is the current breakeven point in terms of number of​ units?
Capital One produces a single product, which it sells for $8.00 per unit. Variable costs per...
Capital One produces a single product, which it sells for $8.00 per unit. Variable costs per unit equal $3.20. The company expects short-term fixed costs to be $7,200 for the coming month, at the projected sales level of 20,000 units. Management is considering several alternative actions designed to improve operating results. In conjunction with this, they have created a profit-planning (that is, a CVP) model, which can be used to evaluate different scenarios. Capital One's management believes that a 10%...
Kritzberg Company makes and sells a product at $60 per unit that has unit variable costs...
Kritzberg Company makes and sells a product at $60 per unit that has unit variable costs of $45. The company’s break-even sales is $180,000. How much profit will the company make if it sells 4,000 units?
BM Company sells two products, X and Y. Product X sells for $20 per unit with...
BM Company sells two products, X and Y. Product X sells for $20 per unit with variable costs of $11 per unit. Product Y sells for $30 per unit with variable costs of $16 per unit. During this period, BM sold 16,000 units of X and 4,000 units of Y, making Total Revenue of $440,000, and after subtracting variable cost got Total Contribution Margin of $200,000, and after subtracting Total Fixed Cost of $110,000, earned Operating Profit of $90,000. The...
Maple Enterprises sells a single product with a selling price of $70 and variable costs per...
Maple Enterprises sells a single product with a selling price of $70 and variable costs per unit of $30. The company’s monthly fixed expenses are $22,000. What dollar sales will Maple need in order to reach a target profit of $29,000? [Hint: enter your answer in 2 decimal places]
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT