$$ 

 

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

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

 

suppose that a firm has an existing product with a combined advertising and promotion budget of $$23,000,000$ and with projected sales of $115,000,000$ units. They are launching a new product with a budget of $$19,000,000$ and estimated sales of $10,000,000$ units in the first year. The sales force expense of $$10,000,000$ 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 Product New Product

MSRP $$4\mathrm{.}95$ $$4\mathrm{.}09$

Volume Discount $31\%37\%$

Unit Cost $$1\mathrm{.}32$ $$1\mathrm{.}18$

Promotional Allowance $17\%22\%$

Advertising & Promotion $$23,000,000$ $$19,000,000$

Allocated Fixed Costs $$77,000,000$ $$13,000,000$

Projected Unit Sales $115,000,00010,000,000$

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 Product New Product

Total Fixed Cost $

$0$

$$

$$

$

$0$

$$

$$

Price to Channel $

$0\mathrm{.}0000$

$$

$$

$

$0\mathrm{.}0000$

$$

$$

Unit Variable Cost $

$0\mathrm{.}0000$

$$

$$

$

$0\mathrm{.}0000$

$$

$$

Break$-$Even Units

$0$

$$

$$

units

$0$

$$

$$

units

Estimated sales for the new product exceed breakeven.