Manson Monograms Sells Stadium Blankets That Have Been Monogrammed with High

question 49

Essay

Manson Monograms sells stadium blankets that have been monogrammed with high school and university emblems.The blankets retail for $40 throughout the country to loyal alumni of over 1,000 schools.?Manson's variable costs are 40% of sales; fixed costs are $120,000 per month.
Required:
a.Manson currently sells 100,000 blankets per year.If sales volume were to increase by 12%, by how much would operating income increase?
b.Assume that variable costs increase to 45% of the current sales price and fixed costs increase by $10,000 per month.If Manson were to raise its sales price 10% to cover these new costs, but the number of blankets sold were to drop by 5%, what would be the new annual operating income?
c.If variable costs and fixed costs were to change as in part (c), would Manson be better off raising its selling price and losing volume or keeping the selling price at $40 and selling 100,000 blankets? Why?

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Definitions:

Standard Deviation

An indicator of the degree of spread or diversity within a collection of numbers.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Good Economy

A state of economic health characterized by strong growth, low unemployment, and stable prices.

Risk-Free Rate

The presumptive return on an investment without risk, usually demonstrated by the interest rates on state securities.