When making the determination of whether or not a selling price should be increased there are many different aspects to take into consideration. Paulsen Company sells only one product. The regular selling price is $50. Variable costs are 70% of this selling price, and fixed costs are $7,500 per month.
Management decides to increase the selling price from $50 to $55 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision. In a response of 400-600 words answer the following:
- What cost-volume relationships should Paulsen take into consideration for the original price and the proposed new selling price?
- Discuss the non-monetary factors that should be taken into consideration before raising a selling price.