FREE Trial

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing

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 $70 per unit, and variable expenses are $40 per unit. Fixed expenses are $540,000 per year. The present annual sales volume (at the $70 selling price) is 15,000 units.


Required:

1. What is the present yearly net operating income or loss?

2. What is the present break-even point in units and in dollar sales’?

3. Assuming that the marketing studies are correct, what is the maximum profit that the company can earn yearly? 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 units and in sales dollars using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)? Why is this break-even point different from the break-even point you computed in (2) above?

This problem has been solved!


Do you need an answer to a question different from the above? Ask your question!

Step by Step Answer:

Answer rating: 80% (15 reviews)

1 Sales 15 000 units 70 per unit 1 050 000 Variable expenses 15 000 units 40 per unit 600 000 Contri…View the full answer


answer-question
Answered By
tutor-profile-image
Asim farooq
I have done MS finance and expertise in the field of Accounting, finance, cost accounting, security analysis and portfolio management and management, MS office is at my fingertips, I want my client to take advantage of my practical knowledge. I have been mentoring my client on a freelancer website from last two years, Currently I am working in Telecom company as a financial analyst and before that working as an accountant with Pepsi for one year. I also join a nonprofit organization as a finance assistant to my job duties are making payment to client after tax calculation, I have started my professional career from teaching I was teaching to a master's level student for two years in the evening. My Expert Service Financial accounting, Financial management, Cost accounting, Human resource management, Business communication and report writing. Financial accounting : • Journal entries • Financial statements including balance sheet, Profit & Loss account, Cash flow statement • Adjustment entries • Ratio analysis • Accounting concepts • Single entry accounting • Double entry accounting • Bills of exchange • Bank reconciliation statements Cost accounting : • Budgeting • Job order costing • Process costing • Cost of goods sold Financial management : • Capital budgeting • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback period • Discounted cash flows • Financial analysis • Capital assets pricing model • Simple interest, Compound interest & annuities
4.40+ 65+ Reviews 86+ Question Solved
Related Book For  answer-question
Managerial Accounting

Managerial Accounting

ISBN: 978-0697789938

13th Edition

Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer

See More Books
Question Details
Chapter # 6
Section: EXERCISES AND PROBLEMS
Problem: 26
View Solution
Create a free account to access the answer
Cannot find your solution?
Post a FREE question now and get an answer within minutes. * Average response time.
Question Posted: June 28, 2011 03:25:33
See More Questions

Students also viewed these Managerial Accounting questions

Q:
For OBrien Company, selling price is $30 per unit and variable costs are $18 per unit. Fixed costs are $90,000. OBrien expects to sell 9,000 units next year. OBrien feels if they increasing annual...
A:
Click to View...
Q:
Suppose a herbal tea company introduced a new product called mint-enhanced tea-mint and lemon herbal tea. How should it go about creating excitement using various social and mobile media tools?
A:
The herbal tea company could use social media to alert customers abou......
Q:
Last year Minden Company introduced a new product and sold 15,000 units of it at a price of $70 per unit. The products variable expenses are $40 per unit and its fixed expenses are $540,000 per year....
A:
1 Sales 15 000 units 70 per unit 1 050 000 Variable expenses 15 000 units 40 per unit 600 000 Contri......
Q:
Explain the difference between impregnation and infiltration. Give some applications for each?
A:
Infiltration is a process in which a metal slug which is having fewer meltin......
Q:
Name two research designs in which related samples are selected.
A:
The repeat......
Q:
In problems 4.28 to 4.51, refer to Table 4.3 for isotopic abundances where needed. Rationalize the fact that the 13 C NMR spectrum of CF 3 CO 2 H consists of two binomial quartets with coupling...
A:
To rationalize the fact that the 13C NMR spectrum of CF3CO2H trifluoroacetic acid consists of two binomial quartets with coupling constants of 44 and......
Q:
Potential for interpersonal conflict should be accepted as a reality of organisational behaviour. hr has limited influence. The only effective way to mitigate adverse effects of conflict is through...
A:
The statement acknowledges a reality of organizational behavior interpersonal conflict is indeed a common occurrence in workplaces It is true that HR......
Q:
On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share.
A:
June 1 Cash 4 000 X 6 24......
Q:
DLList Removal Description You are provided with the following DLList -type object iList: size of list: 2 prev next sentinel nodeElement prev 241 next nodeElement Perform the following two (2)...
A:
Click to View...
Q:
Determine the mass moment of inertia of the thin plate about an axis perpendicular to the page and passing through point O. The material has a mass per unit area of 20kg/m2. 200 mm 200 mm 200 mm
A:
Composite Parts The plate can be subdivided into two......
Q:
Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a standard cutlery set and a deluxe set and sells them to retail department stores throughout the country....
A:
1 Carbex Inc Income Statement For April Standard Deluxe Total Amount Amount Amount Sales 240 000 100......
Q:
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus,...
A:
1 a Selling price 25 100 Variable expenses 15 60 Contribution margin 10 40 Profit Unit CM Q Fixed expenses 0 10 Q 210 000 10Q 210 000 Q 210 000 10 Q 21 000 balls Alternative solution b The degree of o......
Q:
Examine the test statistic used in testing a population proportion. Why is it impossible to test the hypothesis that the population proportion equals zero using such a test statistic? Try to...
A:
You use the population proportion to calcul......
Q:
Identify at least three proposed alterations or alternatives to the Bechdel Wallace Test that provide a more stringent examination and more accurate assessment of healthy representation of women in...
A:
While the Bechdel Wallace Test serves as a valuable tool to highlight gender representation in films several proposed alterations and alternatives aim......
Q:
Write Structured Query Language (SQL) statement to create database, tables, attributes and specify keys by using MySQL Command Client. Suppose your SQL must in line with your proposed EERD iabove....
A:
Creating a complete database schema and specifying keys using SQL requires a detailed understanding......
Q:
Nene Corporation received a 450,000 line of credit at an interest rate of 1%% from LandBank and drew down the entire amount. The line of credit agreement requires that an amount equal to 9% of the...
A:
To calculate the effective annual cost of credit for this loan arrangement you need to consider the......
Q:
Terry Moore - Ted Talk Terry Moore - How to tie your shoes. Observe how the speaker presents information, displays visuals and shares stories and information. Complete information below Introduction...
A:
Introduction Attention Getter Terry Moore opens the talk by standing on the TED stage and addressing the audience directly about a daily habit we ve a......
Q:
Define size and height (see Exercise 8.10) for rooted ternery trees (RTT) and rooted trees (RT). (a) Prove: For any rooted ternary tree (RTT) 7, size(7) (3height(7)+1-1)/3. Find such a bound for the...
A:
Let s break down each part of the question a Prove For any rooted ternary tree RTT T size T 3height T 1 3 To prove this inequality we can use mathemat......
Q:
Solve the following equations for , in the interval 0 < < 360: a. 7 sin = 5 b. 2 cos = 2 c. 3 cos = 2 d. 4 sin = 3 e. 7 tan = 1 f. 8 tan = 15 g. 3 tan = 11 h. 3 cos = 5
A:
a 7 sin 5 Divide both sides by 7 sin 5 7 Using the inverse sine function sin 1 5......
Q:
Which of the following is FALSE regarding the purchasing power parity (PPP). a. The PPP is a manifestation of the law of one price b. The PPP says that a country with a higher expected inflation can...
A:
The detailed answer for the above question is provided below Answer Explanation Th......
Q:
Product costing systems and product profitability Potter Corporation has gained considerable market share in recent years for its specialty, lowvolume, complex line of products, but the gain has been...
A:
Potter Corporation should switch to activity based costing because its current system a......
Q:
Revising a time-driven activity-based cost system, adding products Refer to the Madison Dairy ice cream plant example described in this chapter. Required (a) Suppose that production-related computer...
A:
a The time driven ABC model will now incorporate a capacity cost rate for computer resources compute......
Q:
Revising a time-driven ABC system, cost increases, and process changes Refer to the time-driven ABC analysis of the Madison Dairy ice cream plant example in the chapter. Required (a) Suppose indirect...
A:
a A 10 increase in indirect labor costs will increase the indirect labor capacity cost rate by 10 from 35 to 38 50 and therefore will increase the ind......
Uncertainty In Artificial Intelligence 5 1st Edition - ISBN: 0444887385 - Free Book