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Assume that direct material and direct labor

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Woodinville Cement Company uses a process costing system. In 2011, the company produced and sold 100,000 bags of cement and incurred the following costs:

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The current selling price is $4 per unit, and the profit for 2011 was ($4 x 100,000) - $325,000 = $75,000.Sales projections for 2012 at the current price look flat, but the sales manager believes that if the sales price is reduced to $3.75, sales volume would increase by 12,000 units. Assume that direct material and direct labor are variable costs and that manufacturing costs are primarily fixed. Should Woodinville Cement lower the price?

Reference no: EM13935393

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