The total market for a certain type of product made by Parker Products is estimated to...
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The total market for a certain type of product made by Parker Products is estimated to be 250,000 units. Parker's marketing department estimates that its share of the product's market will depend on its selling price in the following manner: Selling price, $/unit 4.50 5.00 5.50 6.00 Market share, % 29 25 20 14 6.50 7 Parker's industrial engineers estimate that with existing equipment, the fixed cost of production will be $60,000 and the variable cost of production will be $3.10/unit. a) How many units must be sold at each selling price in order to break even? b) How much profit can Parker anticipate at the estimated market share for each selling price? Present the information in the form of table that makes it easy to compare and understand the results for the different selling prices. c) At what price should Parker sell the product? Why? Production specialists at Parker have determined that if they purchase better equipment that's more efficient than the first alternative, they can reduce the variable cost of production to $2.10/unit. Investing in the better equipment would increase the fixed cost to $100,000. d) What effect would buying the better production equipment have on the number of units that must be sold to break even? e) How much profit can Parker anticipate at each selling price? Present the information in the form of a table that makes it easy to compare and understand the results of the different selling prices. f) Should Parker invest in the new production equipment? If they do, at what price should they sell the product? Why? The total market for a certain type of product made by Parker Products is estimated to be 250,000 units. Parker's marketing department estimates that its share of the product's market will depend on its selling price in the following manner: Selling price, $/unit 4.50 5.00 5.50 6.00 Market share, % 29 25 20 14 6.50 7 Parker's industrial engineers estimate that with existing equipment, the fixed cost of production will be $60,000 and the variable cost of production will be $3.10/unit. a) How many units must be sold at each selling price in order to break even? b) How much profit can Parker anticipate at the estimated market share for each selling price? Present the information in the form of table that makes it easy to compare and understand the results for the different selling prices. c) At what price should Parker sell the product? Why? Production specialists at Parker have determined that if they purchase better equipment that's more efficient than the first alternative, they can reduce the variable cost of production to $2.10/unit. Investing in the better equipment would increase the fixed cost to $100,000. d) What effect would buying the better production equipment have on the number of units that must be sold to break even? e) How much profit can Parker anticipate at each selling price? Present the information in the form of a table that makes it easy to compare and understand the results of the different selling prices. f) Should Parker invest in the new production equipment? If they do, at what price should they sell the product? Why?
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