The company is enjoying stable demand with its current

Reference no: EM13605573

Sales revenue $40,000
Incremental Variable cost $16,000
Nonincremental Fixed cost $20,000
[Note: you can assume that variable costs are constant so that the average of them is also the variable cost relevant for a change in sales.]

The company is enjoying stable demand with its current pricing, but management is looking for ways to increase profitability. One suggestion is that the company reposition its water as a premium product, justifying a higher price. If successful, the company believes that it could charge 20% more for its water than it does now.

What is the maximum sales loss (in units) that Healthy Spring could tolerate before a 20% price increase would fail to make a positive contribution to its profitability?

Reference no: EM13605573

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