Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $97 per unit, and variable expenses are $67 per unit. Fixed expenses are $832,800 per year. The present annual sales volume (at the $97 selling price) is 25,100 units.
Required:
1. What is the present yearly net operating income or loss?
2. What is the present break-even point in unit sales and in dollar sales?
3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?
4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?
1) Present net operating income (loss)
Sales (25100*97) | 2434700 |
Variable cost (25100*67) | 1681700 |
Contribution margin | 753000 |
Fixed cost | 832800 |
Net income (loss) | -79800 |
2) Break even unit = 832800/30 = 27760 Units
Break even sales = 27760*97 = $2692720
3) Chart
Selling price | Units | Profit (loss) |
97 | 25100 | -79800 |
95 | 30100 | 10000 |
93 | 35100 | 79800 |
91 | 40100 | 129600 |
89 | 45100 | 159400 |
87 | 50100 | 169200 |
85 | 55100 | 159000 |
So answer is Selling price $87 and Units 50100 Units
4) Break even unit = 832800/(87-67) = 41640 Units
Break even sales = 41640*87 = $3622680
Minden Company introduced a new product last year for which it is trying to find an...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $99 per unit, and variable expenses are $69 per unit. Fixed expenses are $838,200 per year. The present annual sales volume (at the $99 selling price) is 25,100 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $96 per unit, and variable expenses are $66 per unit. Fixed expenses are $837,000 per year. The present annual sales volume (at the $96 selling price) is 25,100 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $97 per unit, and variable expenses are $67 per unit. Fixed expenses are $838,800 per year. The present annual sales volume (at the $97 selling price) is 25,900 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $94 per unit, and variable expenses are $64 per unit. Fixed expenses are $837,300 per year. The present annual sales volume (at the $94 selling price) is 25,100 units. 3. Assuming that the marketing studies...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $94 per unit, and variable expenses are $64 per unit. Fixed expenses are $833,700 per year. The present annual sales volume (at the $94 selling price) is 25,300 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $90 per unit, and variable expenses are $60 per unit. Fixed expenses are $835,800 per year. The present annual sales volume (at the $90 selling price) is 25,700 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $97 per unit, and variable expenses are $67 per unit. Fixed expenses are $837,900 per year. The present annual sales volume (at the $97 selling price) is 25,800 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $100 per unit, and variable expenses are $70 per unit. Fixed expenses are $831,600 per year. The present annual sales volume (at the $100 selling price) is 25,600 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $92 per unit, and variable expenses are $62 per unit. Fixed expenses are $834,000 per year. The present annual sales volume (at the $92 selling price) is 25,600 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $97 per unit, and variable expenses are $67 per unit. Fixed expenses are $837,900 per year. The present annual sales volume (at the $97 selling price) is 25,800 units. Required: 1. What is the present...