Last year Minden Company introduced a new product and sold 25, 300 units of it at a price of $99 per unit. The product's variable expenses are $69 per unit and its fixed expenses are $837,300 per year. Required: 1. What was this product's net operating income (loss) last year? 2. What is the product's break - even point in unit sales and dollar sales? 3. 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? 4. What would be the break - even point in unit sales and in dollar sales using the selling price that you determined in requirement 3?

Last year Minden Company introduced a new product and sold 25, 300 units of it at a price of $99 per unit. The product's variable expenses are $69 per unit and its fixed expenses are $837,300 per year. Required: 1. What was this product's net operating income (loss) last year? 2. What is the product's break - even point in unit sales and dollar sales? 3. 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? 4. What would be the break - even point in unit sales and in dollar sales using the selling price that you determined in requirement 3?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...

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Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
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