Carrolton, Inc

question 161

Essay

Carrolton, Inc. currently sells widgets for $80 per unit. The variable cost is $30 per unit, and total fixed costs equal $240,000 per year. Sales are currently 20,000 units annually.
?The company is considering a 20% drop in selling price that it believes will raise units sold by 20%. Assuming all costs stay the same, what is the impact on income if this change is made?

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Definitions:

Machine Breakdowns

Instances when machinery or equipment fails to operate, causing interruptions in production or operations.

Cost Variance

The differences between actual and standard costs.

Standard Cost

A detailed estimate of what a product should cost.

Actual Cost

The actual amount spent on goods, services, or other expenses, as opposed to budgeted or standard costs, including all direct and indirect costs.