Reference no: EM132553805

The vice-president of marketing, Carol Chow, thinks that her firm can increase sales by 17,000 units for each $5-per-unit reduction in its selling price. The company's current selling price is $90 per unit and variable expenses are $63 per unit. Fixed expenses are $688,500 per year. The current sales volume is 40,500 units.

Answer the following questions:

Question 1: What is the current yearly operating income?

Question 2: What is the current break-even point in units and in dollar sales? (Round contribution margin ratio to 2 decimal places, e.g. 15.25% and final answers to 0 decimal places, e.g. 125.)

Question 3: Assuming that Carol is correct, what is the maximum profit that the firm could generate yearly? At how many units and at what selling price per unit would this profit be generated? Assume that capacity is not a problem and total fixed expenses will be the same regardless of volume.