Question

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 $832,200 per year. The present annual sales volume (at the $94 selling price) is 25,900 units. 8.33 points eBook 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)? Print References Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 What is the present yearly net operating income or loss?

Answer 1

25900 Units Sales Selling Price Per unit Variabel Expense Per unit Fixed Expenses 832200 94.00 64.00 30.00 32% -55200 Compute the CM ratio Selling Price Per unit Variabel Expense Per unit Contribution Margin per unit (Selling Price - Varible Cost) CM Ratio =( CM/Selling Price) Answers 1. Present Yearly Net operating income (loss) (Units CM Per unit)-Fixed cost (25300*30)-835200 = Net operating loss 2 Compute the Break Even point Break Even in Unit Sales =( Fixed Cost / CM Per unit) Brake Even in Dollar sales =( Fixed Cost/ CM ratio) 3. If the Market Studied are Correct Maximum Profit Number of Units Selling Price 4. Break Even Point at this Price Break Even in Unit Sales =( Fixed Cost / CM Per unit) = (832200/(84-64) Break Even in Dollar sales =41610*84 27740 Units 2607560 Dollars 185800 dollars 50900 Units 84 Per unit 41610 Units 3495240 Dollars

Net Selling Price Marketing Studies Increase by 5000 Units with Every $2 Reduction Selling Price sales Revenue = Variable cost=Contribution Operating Sales Units Units * Price Units *VC Margin Fixed Cost income 25900 2434600 1 657600 7770001 832200 -55200 30900 2 842800 1977600 8652001 832200 33000 35900 3231000 2297600 9 334001 832200 101200 88 40900 3599200 2617600 981600832200 149400 459001 3947400 29376001 1009800 832200 177600 84 50900 4275600 3257600 1018000 832200 185800 55900 4583800 3577600 1006200 832200 174000 60900 4872000 3897600 9744001 832200 142200 65900 5140200 4217600 922600 832200 90400 70900 53884004537600 850800 832200 18600 827