Minden Company introduced a new product last year for which it is trying to find
ID: 2394117 • Letter: M
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 seling pice. The company's present seling price is $100 per unit, and variable expenses are $70 per unt Fixed expenses are $831,300 per year The present annual sales volume (at the $100 seling price) is 25.700 units. Required: 1 What is the present yearly net operating income or lass? 2 What is the present break-even point in unit salos and in dollar sales? Break-even poiet in units point in dollar sales 3 Assuming hat the marketing studies are correct, what is the mauemum annual proft that the company can eam? At how many units and at what seling price per unit would the company generate this pro?t? of units Seling priceExplanation / Answer
Solution.
Q1. Present early net income or loss
Q2.
Break even point in unit..
Formula = Fixed cost / Contribution margin per unit
= $831,300 / $30 = 27,710 Unit.
Break-even point in dollar sales..
Formula = Sales price per unit x Break-even unit
= $100 x 27,710 = $2,771,000.
Q3.
Q4.
Break even point in unit..
Formula = Fixed cost / Contribution margin per unit
= $831,300 / $28 = 29,689 Unit.
Break-even point in dollar sales..
Formula = Sales price per unit x Break-even unit
= $98 x 29,689 = $2,909,522.
Particulars Unit Per unit Amount Sales 25,700 100 25,70,000 Variable cost 25,700 70 17,99,000 Contribution margin 25,700 30 7,71,000 Fixed cost 8,31,300 Profit/Loss (60,300)