Answer:
Anderson's Profit is $112,800 after the change in Price and Volume, Although it was $90,000 before the changes.
Explanation:
Unit sold is 20,000 units
Unit Sales Price is $12
Therefore total Sales Value is $240,000
<u>Cost of Production</u>
Direct Material costs $4 x 20,000 = $80,000
Fixed Cost $17,000
Direct Labour costs $0.40 x 20,000 = $8,000
Factory Overhead $0.50 x 20,000 = $10,000
Total Production costs = $115,000
Total Margin = ($240,000 - $115,000) = $125,000
Variable Distribution Costs $5 x 20000 x 0.10 = $10,000
Other Distribution Costs $25,000
Total Distribution costs $35,000
Profit = ($125,000 - $35,000) = $90,000
<u>***If Sales Price increases by $2/unit and Unit Sales drops by 2,000 units</u>
<u></u>
Unit sold is 18,000 units
Unit Sales Price is $14
Therefore total Sales Value is $252,000
<u>Cost of Production</u>
Direct Material costs $4 x 18,000 = $72,000
Fixed Cost $17,000
Direct Labour costs $0.40 x 18,000 = $7,200
Factory Overhead $0.50 x 18,000 = $9,000
Total Production costs = $105,200
Total Margin = ($252,000 - $105,200) = $146,800
Variable Distribution Costs $5 x 18000 x 0.10 = $9,000
Other Distribution Costs $25,000
Total Distribution costs $34,000
Profit = ($146,800 - $34,000) = $112,800
