Lincoln,Inc.is considering the introduction of a new music player with the following price and cost characteristics:
$$\begin{array} { | l | r | l | }
\hline \text { Sales price } & \$ 125 & \text { each } \
\hline \text { Variable costs } & 75 & \text { each } \
\hline \text { Fixed costs } & 180,000 & \text { peryear } \
\hline
\end{array}$$
Projected sales are 7,500 units per year.
(consider each question independent of each other):
(a)What will the operating profit be?
(b)What is the impact on operating profit if the selling price per unit decreases by 15%?
(c)What is the net income if variable costs per unit increase by 15% and Lincoln has a 38% tax rate?

Question

Lincoln,Inc.is considering the introduction of a new music player with the following price and cost characteristics:
 $$\begin{array} { | l | r | l | } 
\hline \text { Sales price } & \$ 125 & \text { each } \
\hline \text { Variable costs } & 75 & \text { each } \
\hline \text { Fixed costs } & 180,000 & \text { peryear } \
\hline
\end{array}$$
Projected sales are 7,500 units per year.
(consider each question independent of each other):
(a)What will the operating profit be?
(b)What is the impact on operating profit if the selling price per unit decreases by 15%?
(c)What is the net income if variable costs per unit increase by 15% and Lincoln has a 38% tax rate?

Quizplus · Accepted Answer

The Answer of Lincoln,Inc.is considering the introduction of a new music player with the following price and cost characteristics:
 $$\begin{array} { | l | r | l | } 
\hline \text { Sales price } & \$ 125 & \text { each } \
\hline \text { Variable costs } & 75 & \text { each } \
\hline \text { Fixed costs } & 180,000 & \text { peryear } \
\hline
\end{array}$$
Projected sales are 7,500 units per year.
(consider each question independent of each other):
(a)What will the operating profit be?
(b)What is the impact on operating profit if the selling price per unit decreases by 15%?
(c)What is the net income if variable costs per unit increase by 15% and Lincoln has a 38% tax rate?

Lincoln,Inc Projected Sales Are 7,500 Units Per Year