What would the gross profit percentage be if the sales price

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Reference no: EM133434989

Case Study: Brewery Ipana Oy has found some potential long-time partners in the restaurant business. To optimize the supply chain, the company is negotiating for contracts that would allow all production in the coming years to be sold to these partners. The contracts aim to shift production to 20 liter barrels of beer, which would become the sole product of Ipana Oy.

In case the negotiations are successful, Ipana Oy estimates its typical year would look as follows: the quantity shipped to the customer is 18000 units at a price of 300 €/unit. The gross profit percentage is 40 % and the yearly fixed costs are 1500000 €.

Additional information:

The variable cost per unit [€/unit] for products that would be produced in the scenario above: 180 €/unit

The critical sales price in the estimate: 264 €/product

The EBITDA (earnings before interests, taxes, depreciations and amortizations) of a typical year : 660000 €

The critical sales volume in the estimate:12500 units

Question:To make the contracts more attractive for customers,brewery Ipana Oy is considering lowering the sales price per product by 10% from the initial estimate. Estimated sales volume, price, and fixed costs would remain as they are.
What would the gross profit percentage be if the sales price was lowered?

Reference no: EM133434989

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