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?

---

Definitions:

Patentable

Eligible to be protected under patent law because it is new, novel, and not obvious, thus can be officially registered as a patent.

Intellectual Property

Legal rights that result from intellectual activity in the industrial, scientific, literary, or artistic fields.

Creative Processes

The steps and methods involved in generating innovative ideas or outcomes, often involving brainstorming, experimentation, and revision.

Counterfeit Labels

Imitation product labels that are illegally produced to mimic genuine brands, typically used to deceive consumers.