Broken Arrow Inc Fixed Costs Are $226,000 Per Month

question 86

Essay

Broken Arrow Inc. produces and sells a single product. Data concerning that product appear below:
$$\begin{array} { l r c } & \text { Per Unit } & \text { Percent of Sales } \\\text { Selling price } & \$ 190 & 100 \% \\\text { Variable costs } & 57 & 30 \% \\\text { Contribution margin } & \$ 133 & 70 \% \\\end{array}$$
Fixed costs are $226,000 per month. The company is currently selling 2,000 units per month.
Required:
The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $13,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 200 units. What should be the overall effect on the company's monthly operating profit of these changes?

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Definitions:

Feedback

Information provided about actions or behaviors, intended to guide future improvements or adjustments.

One-Way Model

A communication model where information flows in only one direction, from sender to receiver, without feedback.

Circular Model

A communication model that emphasizes feedback, indicating that communication is a continuous and dynamic process.

Transaction Model

A communication framework that considers the dynamic and reciprocal exchange of messages between sender and receiver, including the context and potential for feedback.