Question

Perez Company is considering adding a new product. The cost accountant has provided the following data: Check my work Expected variable cost of manufacturing Expected annual fixed manufacturing costs $ 42 per unit $ 74,000 The administrative vice president has provided the following estimates: Expected sales commission Expected annual fixed administrative costs 6 per unit $58,000 The manager has decided that any new product must at least break even in the first year. Required Use the equation method and consider each requirement separately. a. If the sales price is set at $81, how many units must Perez sell to break even? b. Perez estimates that sales will probably be 12,000 units. What sales price per unit will allow the company to break even? c. Perez has decided to advertise the product heavily and has set the sales price at $82. If sales are 12,000 units, how much can the company spend on advertising and still break even?

Answer 1

Peacock Calculations : = $ 74000 cos Expected variable, cost of manufacturing 14 Expected cales commission Variable Cast per unit 1948 I per unit Fixed manufacturing cost Total fixed Cast $ 132000 let breakeven focist Lales - variable cast - fixed cast = profit Elixed administrative cost = $58000 whits be X' => 814 - 480 1, 32,000 - 332 = 432000 2= 4000 Perez has to sell 4000 units to breakeven. or loss, at breakeven point there is no profit ) o let sales price per unit be a Soles variable cout biased cook profit - 1200on- 576000 - 1,32000 30 n = 708000 = x=859 72000 Sales price for unit is $59 if sales is 120gg unit

Let aduertising expense be a Sales - variable cost - fixed cost profit (82 x 12000) - (48X 12000) - (L32000 + ). 984000 576000 122000 - 200 276000 - 20 N = 276000 If units sold is 12000 at $.82 it can incur aduertising cost of $ 276000 and still breakonen Signature