Information on Psi Phi Inc.âs three products are as follows:
A B C
Unit sales per month â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦ 1,600 3,000 1,600
Selling price per unit â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦. $10.00 $15.00 $8.00
Variable cost per unitâ¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦... (10.40) (12.00) (4.00)
Unit contribution marginâ¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦.. $(0.40) $3.00 $4.00
Required:
Determine the effect of each of the following situations wouldhave on monthly profits. Each situation should be evaluatedindependently of all others.
Product A is discontinued.
Product A is discontinued and the subsequent loss of customerscause sales of Product B to decline by 200 units.
The selling price of Product A is increased to $11.00 with asales decrease of 300 units.
The price of Product B is increased to $16.00 with a resultingsales decrease of 400 units. However, some of the customers shiftto Product A; sales of Product A increase by 280 units.
Product A is discontinued, and the plant in which Product A wasproduced is used to produce Product D, a new product. Product D hasa unit contribution margin of $0.60.Monthly sales of Product D arepredicted to be 1,200 units.
The selling price of Product C is increased to $9.00 and theselling price of Product B is decreased to $14.00.Sales of ProductC decline by 400 units, while sales of Product N increase by 600units.
Information on Psi Phi Inc.âs three products are as follows:
A B C
Unit sales per month â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦ 1,600 3,000 1,600
Selling price per unit â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦. $10.00 $15.00 $8.00
Variable cost per unitâ¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦... (10.40) (12.00) (4.00)
Unit contribution marginâ¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦.. $(0.40) $3.00 $4.00
Required:
Determine the effect of each of the following situations wouldhave on monthly profits. Each situation should be evaluatedindependently of all others.
Product A is discontinued.
Product A is discontinued and the subsequent loss of customerscause sales of Product B to decline by 200 units.
The selling price of Product A is increased to $11.00 with asales decrease of 300 units.
The price of Product B is increased to $16.00 with a resultingsales decrease of 400 units. However, some of the customers shiftto Product A; sales of Product A increase by 280 units.
Product A is discontinued, and the plant in which Product A wasproduced is used to produce Product D, a new product. Product D hasa unit contribution margin of $0.60.Monthly sales of Product D arepredicted to be 1,200 units.
The selling price of Product C is increased to $9.00 and theselling price of Product B is decreased to $14.00.Sales of ProductC decline by 400 units, while sales of Product N increase by 600units.