Cogdill Corporation manufactures numerous products, one of which is called Epsilon78. The company has provided the following data about this product: Assume that the total traceable fixed expense does not change. If Cogdill increases the price of Epsilon78 to $19.76, what percentage change in unit sales would provide the same net operating income as is currently being earned at a price of $19.00? (Your answer should be rounded to the nearest 0.1%.)
A) −14.7%
B) −28.3%
C) −5.0%
D) −16.0%

Question

Cogdill Corporation manufactures numerous products, one of which is called Epsilon78. The company has provided the following data about this product:  Assume that the total traceable fixed expense does not change. If Cogdill increases the price of Epsilon78 to $19.76, what percentage change in unit sales would provide the same net operating income as is currently being earned at a price of $19.00? (Your answer should be rounded to the nearest 0.1%.)
A) −14.7% 
B) −28.3% 
C) −5.0% 
D) −16.0%

Quizplus · Accepted Answer

Profit at the current price:
 11eacbfc_c82e_d1fd_8ffe_bd1afff0d894_TB7552_00 Profit = (P − V) × Q − Fixed expenses
$100,000 = ($19.76 per unit − $15.00 per unit) × Q − $580,000
$680,000 = ($19.76 per unit − $15.00 per unit) × Q
$680,000 = ($4.76 per unit) × Q
Q = $680,000 ÷ $4.76 per unit = 142,858 units (rounded up)
Percentage change in unit sales = (142,858 units − 170,000 units) ÷ 170,000 units = −16.0% (rounded)

Cogdill Corporation Manufactures Numerous Products, One of Which Is Called