Question

Morrow City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75-cent price increase, demand is expected to fall by 7,000 units. Current Projected Demand 79,000 units 72,000 units Selling price $8.50 $9.25 Incremental cost per unit $5.80 $5.80 If the price increase is implemented, operating profit is projected to ________.

Answer 1

Operating profit is projected to be $35,100

Step-by-step explanation:

Morrow City International

Analysis of the Current and Projected demand to determine the Operating Profit

Particulars Current Projected Changes in

Demand Demand Demand

Selling price $8.50 $9.25 0.75

Less: Cost Price $5.80 $5.80 0

Contribution $2.7 $3.45 0.75

Margin

Unit Sold 79,000 72,000 -7000

Total $213,300 $248,400 $35,100

Contribution

Note: Total contribution = Unit sold * Contribution margin