Practice 3:Bob Company, a sole proprietorship, sells only one product. The regular price is $160Variable costs are 55 % of this selling price, and fixed costs are $8,400 a month.Management decides to decrease the selling price from $160 to $145 per unit. Assume thatthe cost of the product and the fixed operating expenses are not changed by this pricingdecision(a) At the original selling price of $160 a unit, what is the contribution margin ratio?%(b) At the original selling price of $160 a unit, what dollar volume of sales per month isrequired for Bob Company to break-even? (Round your answer to the nearest wholedollar.) $(c) At the original selling price of $160 a unit, what dollar volume of sales per month isrequired for Bob Company to eam a monthly operating income of $6,500? (Roundyour answer to the nearest whole dollar.) $(d) At the reduced selling price of $145 a unit, what is the contribution margin ratio?(e) At the reduced selling price of $145 a unit, what dollar volume of sales per month isrequired to break-even? (Round your intermediate percentage to one decimal placeand final answer to the nearest whole dollar.) $(While questioning management's sanity in making this decision, you pause toconsider whether it is ever a good idea to adjust prices to the point where you aremaking less money. Provide 2 possible explanations why Bob may have beenjustified in their decision to reduce the price.

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Practice 3:

Bob Company, a sole proprietorship, sells only one product. The regular price is $160. Variable costs are 55% of this selling price, and fixed costs are $8,400 a month.

Management decides to decrease the selling price from $160 to $145 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.

  • At the original selling price of $160 a unit, what is the contribution margin ratio? ________%

 

  • At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to break-even? (Round your answer to the nearest whole dollar.) $________

 

 

  • At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to earn a monthly operating income of $6,500? (Round your answer to the nearest whole dollar.) $________

 

  • At the reduced selling price of $145 a unit, what is the contribution margin ratio? ________%

 

 

  • At the reduced selling price of $145 a unit, what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place and final answer to the nearest whole dollar.) $________
  • While questioning management’s sanity in making this decision, you pause to consider whether it is ever a good idea to adjust prices to the point where you are making less money. Provide 2 possible explanations why Bob may have been justified in their decision to reduce the price.

 

 

Practice 3:
Bob Company, a sole proprietorship, sells only one product. The regular price is $160
Variable costs are 55 % of this selling price, and fixed costs are $8,400 a month.
Management decides to decrease the selling price from $160 to $145 per unit. Assume that
the cost of the product and the fixed operating expenses are not changed by this pricing
decision
(a) At the original selling price of $160 a unit, what is the contribution margin ratio?
%
(b) At the original selling price of $160 a unit, what dollar volume of sales per month is
required for Bob Company to break-even? (Round your answer to the nearest whole
dollar.) $
(c) At the original selling price of $160 a unit, what dollar volume of sales per month is
required for Bob Company to eam a monthly operating income of $6,500? (Round
your answer to the nearest whole dollar.) $
(d) At the reduced selling price of $145 a unit, what is the contribution margin ratio?
(e) At the reduced selling price of $145 a unit, what dollar volume of sales per month is
required to break-even? (Round your intermediate percentage to one decimal place
and final answer to the nearest whole dollar.) $
(While questioning management's sanity in making this decision, you pause to
consider whether it is ever a good idea to adjust prices to the point where you are
making less money. Provide 2 possible explanations why Bob may have been
justified in their decision to reduce the price.
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Practice 3: Bob Company, a sole proprietorship, sells only one product. The regular price is $160 Variable costs are 55 % of this selling price, and fixed costs are $8,400 a month. Management decides to decrease the selling price from $160 to $145 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision (a) At the original selling price of $160 a unit, what is the contribution margin ratio? % (b) At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to break-even? (Round your answer to the nearest whole dollar.) $ (c) At the original selling price of $160 a unit, what dollar volume of sales per month is required for Bob Company to eam a monthly operating income of $6,500? (Round your answer to the nearest whole dollar.) $ (d) At the reduced selling price of $145 a unit, what is the contribution margin ratio? (e) At the reduced selling price of $145 a unit, what dollar volume of sales per month is required to break-even? (Round your intermediate percentage to one decimal place and final answer to the nearest whole dollar.) $ (While questioning management's sanity in making this decision, you pause to consider whether it is ever a good idea to adjust prices to the point where you are making less money. Provide 2 possible explanations why Bob may have been justified in their decision to reduce the price.

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Cost-Volume-Profit (CVP) Analysis: It is a method followed to analyze the relationship between the sales, costs, and the related profit or loss at various levels of un...

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