A manufacturer in a growing market area, with fixed costs of $350,000 per year, sells a...

 

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A manufacturer in a growing market area, with fixed costs of $350,000 per year, sells a large number of different products. It is currently selling 3,000 units per year of one of these products at a price of $75 per unit. The variable costs for this product are $42 per unit. Management expects that, without any change in price, next year's sales of this product will increase to 3,500 units per year. This sales increase will occur because the market is growing. Management is considering decreasing the product's price next year from the current $75 to $70 in an attempt to increase the company's market share. (a) In calculating the breakeven sales change for the price change that is being considered, what is the base sales level that should be used? (b) Calculate the unit breakeven sales level for this possible price change. A manufacturer in a growing market area, with fixed costs of $350,000 per year, sells a large number of different products. It is currently selling 3,000 units per year of one of these products at a price of $75 per unit. The variable costs for this product are $42 per unit. Management expects that, without any change in price, next year's sales of this product will increase to 3,500 units per year. This sales increase will occur because the market is growing. Management is considering decreasing the product's price next year from the current $75 to $70 in an attempt to increase the company's market share. (a) In calculating the breakeven sales change for the price change that is being considered, what is the base sales level that should be used? (b) Calculate the unit breakeven sales level for this possible price change.

Answer rating: 100% (QA)

a In calculating the breakeven sales change for the price change that is being considered we should ... View the full answer