Minden Company Introduced a new product last year tor which it is trying to tind
ID: 2424092 • Letter: M
Question
Minden Company Introduced a new product last year tor which it is trying to tind an optimal selling price Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $99 per unit, and variable expenses are $69 per unit. Fixed expenses are $834,300 per year. The present annual sales volume (at the $99 selling price) is 25,300 Required: 1. What is the present yearly net operating income or loss? 2. What is the present break-even point in unit sales and in dollar sales? Break-even point in units Break-even point in dollar salesExplanation / Answer
(1) Present Net Operating Income/Loss Amount in $
Qty. Sold 25,300
Sale Price Per Unit 99
Sale Value 2,504,700
Cost of Goods Sold
Variable Cost 1,745,700
Fixed Expenses 834,300
Total Cost 2,580,000
Net Operating loss (75,300)
(2) Break Even Point Fixed Cost/ Contribution
Contribution Per Unit 30
BEP In Units 27,810
BEP In Dollor Sales 2,753,190
(3)
Maximum Profit 171,700
No. of Units 50,300
Sale Price 89
Working
If sale Price is decrease by Rs. 8/-
Qty. Sold 45,300
Sale Price Per Unit 91
Sale Value 4,122,300
Cost of Goods Sold
Variable Cost 3,125,700
Fixed Expenses 834,300
Total Cost 3,960,000
Net Operating loss 162,300
If sale Price is decrease by Rs. 10/-
Qty. Sold 50,300
Sale Price Per Unit 89
Sale Value 4,476,700
Cost of Goods Sold
Variable Cost 3,470,700
Fixed Expenses 834,300
Total Cost 4,305,000
Net Operating loss 171,700
If sale Price is decrease by Rs. 12/-
Qty. Sold 55,300
Sale Price Per Unit 87
Sale Value 4,811,100
Cost of Goods Sold
Variable Cost 3,815,700
Fixed Expenses 834,300
Total Cost 4,650,000
Net Operating loss 161,100
(4) BEP as per point no 3
Contribution Per Unit 20
BEP In Units 41,715
BEP In Dollor Sales 3,712,635