You are upgrading to better production equipment for your fi

You are upgrading to better production equipment for your firm’s only product. The new equipment will allow you to make more of your product in the same amount of time. Thus, you forecast that total sales will increase nex year by 18% over the current amount of 98, 000 units. If you sales price is $22 per unit, what are the incremental revenues next year from the upgrade?

Solution

Current sales = 98000 units

Incremental units sold = 98000*18% i.e 17640

Incremental Revenue = 17640*22 i.e 388080