Reference no: EM132507090

Problem 1: Assume that Freese, Inc. decided that because of strong economic conditions in general, a 10% increase in the expected number of units to be sold each month was realistic. Explain the effect, in general, on each of the budgets presented of a 10% increase in the number of units sold.

Problem 2:  Assuming that the number of units sold would not change, explain the effect on the budgets presented of a 5% increase in the selling price of the product. How does this price change effect differ from the sales volume effect you described above?

Problem 3: The purchasing manager is evaluating an alternative supplier that would provide a slightly lower grade of raw material at a savings from the current price of $4 per pound. The new price would be at $3.50 per pound but the product would now require six pounds of the lower grade of raw material to produce the same number of good finished units as currently achieved. Would you recommend the change to the new supplier? What if the new price was to be $3.00? How about a price of $3.285307? Explain your answers.