Break$-$Even Analysis

Compute break$-$even units using the following formula:

Break$-$Even Units $=$ Total Fixed Costs $/($ Unit Selling Price $$ Unit Variable Cost $)$

For this assignment suppose that a firm has an existing product with a combined advertising and promotion budget of $$23,000,000$ and with projected sales of $115,000,000$ units. They are launching a new product with a budget of $$18,000,000$ and estimated sales of $10,000,000$ units in the first year. The sales force expense of $$8,000,000$ has been allocated equally between products; $90\%$ of the plant overhead has been allocated to the existing product, and $10\%,$ to the new product. Additional values for each product are shown in the table below.

$$Existing ProductNew ProductMSRP$$6\mathrm{.}35$$$5\mathrm{.}19$Volume Discount$36\%37\%$Unit Cost$$1\mathrm{.}30$$$1\mathrm{.}02$Promotional Allowance$15\%19\%$Advertising & Promotion$$23,000,000$$$18,000,000$Allocated Fixed Costs$$67,000,000$$$11,000,000$Projected Unit Sales$115,000,00010,000,000$

Question $2$

Calculate the break$-$even units for each product, showing the intermediate calculations for the total fixed costs, prices to channel, and unit variable costs.

$$Existing ProductNew ProductTotal Fixed Cost$$$$$$Price to Channel$$$$$$Unit Variable Cost$$$$$$Break$-$Even Units$$units$$units

Estimated sales for the new product exceed breakeven. $($select option$)$TrueFalse

Show your work or leave a comment

$01$