Maccarone Corporation manufactures numerous products, one of which is called Tau10. The company has provided the following data about this product:
Required:
a. What net operating income is the company earning now on its sales of Tau10?
b. Management is considering decreasing the price of Tau10 by 5%, from $36.00 to $34.20. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 130,000 units to 143,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Tau10 earn at a price of $34.20 if this sales forecast is correct?
c. Assuming that the total traceable fixed expense does not change, if Maccarone decreases the price of Tau10 to $34.20, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $36.00? (Round your answer to the nearest one-tenth of a percent.)

Question

Maccarone Corporation manufactures numerous products, one of which is called Tau10. The company has provided the following data about this product:
  Required:
a. What net operating income is the company earning now on its sales of Tau10?
b. Management is considering decreasing the price of Tau10 by 5%, from $36.00 to $34.20. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 130,000 units to 143,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Tau10 earn at a price of $34.20 if this sales forecast is correct?
c. Assuming that the total traceable fixed expense does not change, if Maccarone decreases the price of Tau10 to $34.20, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $36.00? (Round your answer to the nearest one-tenth of a percent.)

Quizplus · Accepted Answer

The Answer of Maccarone Corporation manufactures numerous products, one of which is called Tau10. The company has provided the following data about this product:
  Required:
a. What net operating income is the company earning now on its sales of Tau10?
b. Management is considering decreasing the price of Tau10 by 5%, from $36.00 to $34.20. The company's marketing managers estimate that this price reduction would increase unit sales by 10%, from 130,000 units to 143,000 units. Assuming that the total traceable fixed expense does not change, what net operating income will Tau10 earn at a price of $34.20 if this sales forecast is correct?
c. Assuming that the total traceable fixed expense does not change, if Maccarone decreases the price of Tau10 to $34.20, what percentage change in unit sales would provide the same net operating income that it currently earns at a price of $36.00? (Round your answer to the nearest one-tenth of a percent.)

Maccarone Corporation Manufactures Numerous Products, One of Which Is Called