Argentina Partners is concerned about the possible effects ofinflation on its operations. Presently, the company sells 64,000units for $50 per unit. The variable production costs are $30, andfixed costs amount to $740,000. Production engineers have advisedmanagement that they expect unit labor costs to rise by 20 percentand unit materials costs to rise by 5 percent in the coming year.Of the $30 variable costs, 50 percent are from labor and 20 percentare from materials. Variable overhead costs are expected toincrease by 25 percent. Sales prices cannot increase more than 10percent. It is also expected that fixed costs will rise by 7percent as a result of increased taxes and other miscellaneousfixed charges.
The company wishes to maintain thesame level of profit in real dollar terms. It is expected that toaccomplish this objective, profits must increase by 8 percentduring the year.
Required:
(a) Compute the volume in units and the dollar sales level necessaryto maintain the present profit level, assuming that the maximumprice increase is implemented. (Round only yourintermediate per unit cost calculations to 2 decimal places. Roundup your Volume in Units final answer to the nearest whole unit.Round your Sales final answer to the nearest wholedollar.)
Units in Volume =
Sales =
Argentina Partners is concerned about the possible effects ofinflation on its operations. Presently, the company sells 64,000units for $50 per unit. The variable production costs are $30, andfixed costs amount to $740,000. Production engineers have advisedmanagement that they expect unit labor costs to rise by 20 percentand unit materials costs to rise by 5 percent in the coming year.Of the $30 variable costs, 50 percent are from labor and 20 percentare from materials. Variable overhead costs are expected toincrease by 25 percent. Sales prices cannot increase more than 10percent. It is also expected that fixed costs will rise by 7percent as a result of increased taxes and other miscellaneousfixed charges. |
The company wishes to maintain thesame level of profit in real dollar terms. It is expected that toaccomplish this objective, profits must increase by 8 percentduring the year. |
| Required: |
| (a) | Compute the volume in units and the dollar sales level necessaryto maintain the present profit level, assuming that the maximumprice increase is implemented. (Round only yourintermediate per unit cost calculations to 2 decimal places. Roundup your Volume in Units final answer to the nearest whole unit.Round your Sales final answer to the nearest wholedollar.) Units in Volume = Sales = |
Related questions
Argentina Partners is concerned about the possible effects ofinflation on its operations. Presently, the company sells 64,000units for $50 per unit. The variable production costs are $30, andfixed costs amount to $740,000. Production engineers have advisedmanagement that they expect unit labor costs to rise by 20 percentand unit materials costs to rise by 5 percent in the coming year.Of the $30 variable costs, 50 percent are from labor and 20 percentare from materials. Variable overhead costs are expected toincrease by 25 percent. Sales prices cannot increase more than 10percent. It is also expected that fixed costs will rise by 7percent as a result of increased taxes and other miscellaneousfixed charges. |
The company wishes to maintain thesame level of profit in real dollar terms. It is expected that toaccomplish this objective, profits must increase by 8 percentduring the year. |
| Required: |
| (a) | Compute the volume in units and the dollar sales level necessaryto maintain the present profit level, assuming that the maximumprice increase is implemented. (Round only yourintermediate per unit cost calculations to 2 decimal places. Roundup your Volume in Units final answer to the nearest whole unit.Round your Sales final answer to the nearest wholedollar.) |
Volume in Units=
Sales=
| (b) | Compute the volume of sales and the dollar sales level necessaryto provide the 8 percent increase in profits, assuming that themaximum price increase is implemented. (Round only yourintermediate per unit cost calculations to 2 decimal places. Roundup your Volume in Units final answer to the nearest whole unit.Round your Sales final answer to the nearest wholedollar.) |
Volume in units=
Sales=
| (c) | If the volume of sales were to remain at 64,000 units, whatprice increase would be required to attain the 8 percent increasein profits? Calculate the new price. (Round your answer to2 decimal places.) |
New Price=
