Answer:
St. Vincent
1. Contribution margin with sales of 80,000 sheets at $8.00 each:
Sales revenue $640,000
Cost of sales 64,000
Contribution $576,000
2. Percentage decrease in selling price:
Old price = $8.00
New price = 7.00
Decrease = $1.00
Decrease in percentage = $1/$8 * 100
= 12.5%
3. Percentage increase in sales units:
New sales units = 93,600
Old sales units = 80,000
Increase in units 13,600
Increase in percentage = 13,600/80,000 * 100
= 17%
4. Contribution margin with sales of 93,600 sheets at $7.00 each:
Sales revenue $655,200
Cost of sales 64,000
Contribution $591,800
Old contribution 576,000
Increase = $15,200
5. Contribution per margin (new price) = $6.20 ($7.00 - $0.80)
Units to sell to equal the total contribution margin earned at the higher price of $8.00 = 92,903 ($576,000/$6.20)
6. Percentage increase in the number of sheets sold at $7.00 to equal the total contribution margin earned at the higher price of $8.00:
New units = 92,903
Old units = 80,000
Increase = 12,903
Percentage increase = 12,903/80,000 * 100
= 16.129
= 16.13%
7. The common fixed costs do not vary according to the units sold. Allocating a portion of the fixed costs to the alternatives does not make the comparison more accurate.
Step-by-step explanation:
a) Data and Calculations:
Cost of a souvenir = $0.80
Selling price per souvenir = $8.00
Sales units = 80,000
Selling price of a new souvenir = $7.00
Sales units of the new souvenir = 93,600