Discussion question on cost variation

Laurel Company manufactures a high-quality wooden birdhouse that sells

for $25 per unit. Variable costs are $8 per unit, and fixed costs total

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$130,000. The company sold 40,000 birdhouses to customers during 2018.

The president of Laurel Company believes the following changes should

be made in 2019:

1. the selling price of the birdhouse should be reduced by 20%

2. increase advertising by $35,000

Assume these changes are made. Calculate the number of units Laurel

Company must sell in 2019 in order to earn a target profit equal to

16% of sales.

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