Question

In: Accounting

Minden Company introduced a new product last year for which it is trying to find an...

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 selling price. The company’s present selling price is $96 per unit, and variable expenses are $66 per unit. Fixed expenses are $830,400 per year. The present annual sales volume (at the $96 selling price) is 25,400 units.

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?

3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?

4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?

Solutions

Expert Solution

25,400
total per unit
1) Sales 2438400 96
less :Variable cost 1676400 66
contribution marging 762000 30
less:fixed expense 830,400
Net operating income(loss) -68,400
net operating loss -68,400
2) Break even point in units 27680
Break even point in dollars 2657280
BEP(units)                = fixed cost/contribution margin per unit
BEP(dollars)              = BEP units * selling price per unit
3) units 25,400 30,400 35,400 40,400 45,400 50,400 55,400 60,400
selling price per unit 96 94 92 90 88 86 84 82
less:Variable expense -66 -66 -66 -66 -66 -66 -66 -66
contribution per unit 30 28 26 24 22 20 18 16
total contribution margin 762000 851200 920400 969600 998800 1008000 997200 966400
less:fixed expense -830,400 -830,400 -830,400 -830,400 -830,400 -830,400 -830,400 -830,400
net operating income(loss -68400 20800 90000 139200 168400 177600 166800 136000
Maimum profit 177600
number of units 50,400
selling price 86
4) Break even point in units 41520
Break even point in dollars 3570720
BEP(units)                = fixed cost/contribution margin per unit
BEP(dollars)              = BEP units * selling price per unit

Related Solutions

Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $90 per unit, and variable expenses are $60 per unit. Fixed expenses are $837,600 per year. The present annual sales volume (at the $90 selling price) is 25,900 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $96 per unit, and variable expenses are $66 per unit. Fixed expenses are $833,700 per year. The present annual sales volume (at the $96 selling price) is 25,900 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $97 per unit, and variable expenses are $67 per unit. Fixed expenses are $835,500 per year. The present annual sales volume (at the $97 selling price) is 25,200 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $70 per unit, and variable expenses are $40 per unit. Fixed expenses are $540,000 per year. The present annual sales volume (at the $70 selling price) is 15,000 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $92 per unit, and variable expenses are $62 per unit. Fixed expenses are $834,300 per year. The present annual sales volume (at the $92 selling price) is 25,400 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $93 per unit, and variable expenses are $63 per unit. Fixed expenses are $833,700 per year. The present annual sales volume (at the $93 selling price) is 25,100 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $91 per unit, and variable expenses are $61 per unit. Fixed expenses are $834,600 per year. The present annual sales volume (at the $91 selling price) is 25,800 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $99 per unit, and variable expenses are $69 per unit. Fixed expenses are $837,600 per year. The present annual sales volume (at the $99 selling price) is 25,200 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $94 per unit, and variable expenses are $64 per unit. Fixed expenses are $838,200 per year. The present annual sales volume (at the $94 selling price) is 25,100 units. Required: 1. What is the present...
Minden Company introduced a new product last year for which it is trying to find an...
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 selling price. The company’s present selling price is $94 per unit, and variable expenses are $64 per unit. Fixed expenses are $835,500 per year. The present annual sales volume (at the $94 selling price) is 26,000 units. Required: 1. What is the present...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT