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

question 9

Essay

Broken Arrow Inc.produces and sells a single product.Data concerning that product appear below:
$$\begin{array} { | l | r | r | } \hline & \text { Per Unit } & \text { Percent of Sales } \\\hline \text { Selling price } & \$ 190 & 100 \% \\\hline \text { Variable costs } & \underline { 57} & \underline { 30 \%} \\\hline \text { Contribution margin } & \$ 133 & 70 \% \\\hline\end{array}$$
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:

Federal System

A form of government in which power is divided between a central (national) authority and constituent (state or regional) units, allowing for shared sovereignty.

Government Power

The authority held by a government to enact laws, regulate behaviors, and enforce order for the welfare of the society.

Cooperative Federalism

A concept where state, local, and federal governments collaborate and share responsibilities, powers, and resources to solve common problems or improve citizens’ lives.

Devolution

The transfer or delegation of power to a lower level, especially by central government to local or regional administrations, without relinquishing authority.