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Question - Tasty Food Co., located in Renton, Washington, has the following selected information relating to its operations:
Selling price per unit $15.50
Variable Cost per unit $9.00
Total Fixed Costs $1,625,000
Number of units sold 375,000
The selling price of the company's product is currently at the maximum amount that the market will accept. Tasty's management believes that any increase in sales price will result in lost unit sales.
For the upcoming year, Tasty's accountants have estimated that unit variable costs will increase by 8% and unit sales will decrease by 5%. Compute the amount that the company must reduce its fixed costs by for the upcoming year in order to earn the same amount of profit they are currently earning. Assume that there are no other changes.
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