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Business, 01.10.2019 02:00 harringtonrob16
Next year the company will use new material, which will reduce material costs by 50% and direct labor costs by 50% and will not affect product quality or marketability. management is considering an increase in the unit sales price to reduce the number of units sold because the factory’s output is nearing its annual output capacity of 30,000 units. two plans are being considered. under plan 1, the company will keep the price at the current level and sell the same volume as last year. this plan will increase income because of the reduced costs from using the new material. under plan 2, the company will increase price by 20%. this plan will decrease unit sales volume by 5%. under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same.
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