Currently considering ways to improve profitability

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Reference no: EM132210084

Kaizer Plastics produces a variety of plastic items for packaging and distribution. One item, container #145, has had a low contribution to profits. Last year, 22,000 units of container #145 were produced and sold. The selling price of the container was $30 per unit, with a variable cost of $15 per unit and a fixed cost of $74,000 per year.

The company is currently considering ways to improve profitability. Management believes that it can reduce their variable cost to 90 percent of their current value. Assuming all other costs equal, by how much would profits increase?

Reference no: EM132210084

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