Last year Minden Company introduced a new product and sold 15,000 units of it at a price
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Question:
Last year Minden Company introduced a new product and sold 15,000 units of it at a price of $70 per unit. The product's variable expenses are $40 per unit and its fixed expenses are $540,000 per year.
Required:
- What was this product's net operating income (loss) last year?
- What is the product's break-even point in unit sales and dollar sales?
- Assume the company has conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g., $68, $66, etc.), what is the maximum annual profit that it can earn on this product? What sales volume and selling price per unit generate the maximum profit?
- What would be the break-even point in unit sales and in dollar sales using the selling price that you determined in requirement 3?
Related Book For
Managerial Accounting
ISBN: 9781260247787
17th Edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
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