3310solmod07

3310solmod07 - Module 7 Answers 3-38(30 min Pricing...

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Module 7 Answers 3-38. (30 min.) Pricing Decisions: Jen & Barry’s. a. Status Quo 20,000 quarts Alternative 20,400 quarts Difference Sales revenue . .............. \$60,000 a \$60,900 b \$900 (higher) Less variable costs: Materials. ..................... 20,000 20,400 400 (higher) Labor. .......................... 10,000 10,200 200 (higher) Variable overhead . ...... 5,000 5,100 100 (higher) Total variable cost. .... \$35,000 \$35,700 \$700 (higher) Contribution margin . ...... \$25,000 \$25,200 \$200 (higher) Less fixed costs. ............ 20,000 20,000 0 (higher) Operating profit. ............. \$ 5,000 \$ 5,200 \$200 (higher) Operating profits would be higher with the additional order by \$200. a \$60,000 = 20,000 quarts x \$3.00 per quart b \$60,900 = (20,000 quarts x \$3.00 per quart) + (400 quarts x \$2.25 per quart) b. The lowest price the ice cream could be sold without reducing profits is \$1.75 per quart, which would just cover the variable costs of the ice cream.

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3310solmod07 - Module 7 Answers 3-38(30 min Pricing...

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