Cost 8 - 13-16 Estimate Sales Revenues SVI is a large...

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13-16 Estimate Sales Revenues SVI is a large securities dealer. Last year, the company made 150,000 trades with an average commission of $60. Because of the general economic climate, SVI expects trade volume to decline by 15 percent. In addition, employees at a local manufacturing plant have historically constituted 10 percent of SVI’s volume. The plant just closed and all employees have closed their accounts. Offsetting these factors is the observation that the average commission per trade is likely to increase by 15 percent because trades are expected to be larger in the coming year. Estimate SVI’s commission revenues for the coming year. Average commission per trade = $60 New average commission per trade with 15% increase = $60 x 1.15 = $69 Expected number of trades 150,000 – (150,000 x 10% employees at local plant) = 135,000 135,000 – (135,000 x 15% decline expected) 114,750 Expected commission revenues= 114,750 trades x $69 per trade $7,917,750 13-19 Estimate production Levels
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