Question

EasyFind manufactures and sells golf balls. The company is conducting a price test to find a better price point. Presently their golf balls sell for $23 per dozen. Their current volume is 4,470 dozen per month. They are considering reducing their sales price by 26% per dozen

If variable costs are $10 per dozen, what is the new volume required to earn the same total contribution as before the price decrease?

Answer 1

To earn the same total contribution as before the price decrease, the new volume required is approximately 640 dozen.

Step-by-step explanation:

To find the new volume required to earn the same total contribution as before the price decrease, we need to consider the changes in price and variable costs.

The new price for the golf balls after the 26% decrease is:

$23 - ($23 * 0.26)

= $16.98 per dozen.

The contribution per dozen is calculated as: price - variable costs

= $16.98 - $10

= $6.98.

To maintain the same total contribution, we divide the original volume by the new contribution per dozen:

4,470 dozen / $6.98

= 639.54 dozen.

Therefore, the new volume required to earn the same total contribution is approximately 640 dozen.