Minden Company introduced a new product last year and is trying to find an optimal selling price....
Question:
Minden Company introduced a new product last year and 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 $98 per unit, and variable expenses are $68 per unit. Fixed expenses are $837,600 per year. The present annual sales volume (at the $98 selling price) is 25,200 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)?
Profit Maximization:
Profit maximization is a model, where at some selling price it will sale such no. of units where the profit is maximization. Any more or less units sold then the units determined under profit maximization model will fetch lessor profit.
Equation of Profit Maximization Model is:
P = a-bQ
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answer1. Present Income statement
| Particular | Amount |
| Sales Revenue | 2469600 |
| Variable Expenses | 1713600 |
| Contribution | 756000 |
| Fixed Cost | 837600 |
| Profit | (81600) |
2. Co...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Profit Maximization: Definition, Equation & Theory
from
Chapter 24 / Lesson 6
41K
Learn the profit maximization definition, its importance, and explore the profit maximization theory. See how to calculate profit maximization with examples.
Related to this Question
- Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest the company can increase sales by 5,000 units for each $2 reduction
- 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 re
- 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 sel
- Minden Company introduced a new product last year and 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 redu
- 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 redu
- 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 redu
- A 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
- Company XYZ 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 reducti
- Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: Minden Company
- Corliss Ford, director of marketing, wants to reduce the selling price of his company's products by 15% to increase market share. He says, "I know this will reduce our gross profit rate, but the increased number of units sold will make up for the lost mar
- Van Doren Corporation is considering producing a new temperature regulator called Digidial. Marketing data indicate that the company will be able to sell 45,000 units per year at $30. The product will
- The company believes that a reduction in the sales price of 10%, combined with an increase in advertising of $8000 will cause an increase in sales volume of 20%. If the company undertakes this advertising campaign by how much will income increase or decre
- Waren made a promotional sale on account to Rosemont University. For The promotion, Waren agreed to a 15% reduction in the selling prices of the following items: originally costing 205 for premium alu
- A company is able to implement one of two strategies regarding a particular product: hire a marketing firm to increase sales 24% or assign a product procurement manager who can reduce material cost fo
- 1. Tellespan Company's newest product is losing money because of low sales volume. Market surveys suggest that the product is priced higher than its competition. The company uses an activity-based cos
- Whitney Sewing and Alterations has just introduced a new line of alteration services for men's suits for which the company is trying to determine an optimal selling price. Marketing studies suggest that the company can increase sales by 2,000 units for ea
- Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of Apri 30 is given below: The company is in the process of preparing a budget for May and has
- The marketing objective of a firm whose product is in the maturity stage of the PLC is to: a. Actively search out new first-time users b. Hold market share through further product differentiation and find new buyers c. Actively reinforce competitor's mark
- A company believes it can sell 1,000,000 units of its proposed new can opener at a price of $14.00 each. If the company desires to make a profit of $3,000,000 on the can opener, what is the target cos
- The marketing department at Cleveland Furniture Mfg. has an idea for a new product that is expected to have a 6-year life cycle. After conducting market research, the company found that the product could sell for $800 per unit in the first 4 years of life
- A firm in monopolistic competition produces athletic shoes. If it spends nothing on advertising it can sell 100 pairs of shoes per day at a price of $180. For each $20 decrease in price, the quantity
- Company A has just designed a new product with a target cost of $64. Company A requires the new product to have a profit of 20%. What is the target price for the new product? a. $64 b. $12.80 c. $320 d. $80 e. $53
- Van Doren Corporation is considering producing a new product called Autodial. Marketing data indicate that the company will be able to sell 45,000 units per year at $30. The products will be produced in a section of an existing factory that is currently n
- Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographic
- Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $9.00. The new customer is geographic
- Buy Best Inc. sells electronic equipment. Management decided early in the year to reduce the price of the speakers in order to increase sales volume. As a result, for the year ended December 31, the sales increased by $31,875 from the planned level of $1,
- Albertson Corporation began a special promotion in July 2016 in an attempt to increase sales. A coupon was placed in a box of the product. Customers could be sent in 5 coupons for a free prize. Each p
- If a company decides to offer a new product where they introduced a new flavor, color, or size of an existing product, this is best described as a: a. Brand extension b. Repositioning extension c. Line extension d. Valuation extension
- During the first calendar quarter of 2016, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 6,000 units in the
- Oregon Equipment Company wants to develop a new log-splitting machine for homeowners. Market research has determined that the company could sell 5,000 log-splitting machines per year at a retail price
- During the first calendar quarter of 2016, Clinton Corporation is Lo planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 6,000 units in
- Trio Company sells three products, Do, Ra, and Mi, for prices of $8, $7, and $5, respectively. They also offer combinations of the products for reduced overall prices. The following packages are avail
- Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below Budget
- Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below: April May June Total Budgeted sales (all on account) $480,0
- 1. Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below: |
- JCH Sports plans to market a new product for the upcoming college season. Costs associated with the new product, at two different volume ranges, are as follows: | | <= 220,000 units|> 220,000 units |
- 1.) Special Order: Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new cu
- During the period 2010 through 2014 the company has expanded their product line and opened new stores. This caused the increase in sales during this period. An analysis of the information shows the following. - In 2011 an increase in sales of 20%. - Act
- Harlan Gravity Grips produces spike sets for track shoes. CEO Brittany Harlan has gathered the following information about the company's sales volume and marketing cost for the past six months. Sales
- Hoppy Cat Toy Company has estimated the following amounts for its next fiscal year: If the company spends an additional $34,000 on advertising, sales volume would increase by 2,900 units. What effec
- Silver Company makes a product that is very popular as a Mother's Day gift, Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below: Apri
- If a firm buys new equipment, will this increase or decrease the firm's cash balance?
- The management of Kozloff Corporation is considering introducing a new product - a compact barbecue. At a selling price of $74 per unit, management projects sales of 80,000 units. Launching the barbe
- Buy Best Inc. sells electronic equipment. Management decided early in the year to reduce the price of the speakers in order to increase sales volume. As a result, for the year ended December 31, the s
- Kingbird Company sells goods to Oriole Company during 2017. It offers Oriole the following rebates based on total sales to Oriole. If total sales to Oriole are 9,300 units, it will grant a rebate of
- Special Order Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer
- A company, which sells two different models of an item, finds 65% of its customers buy the cheaper model, for $95. The remaining 35% of the customers pay $125 for the more expensive model. What is the expected purchase price?
- Bramble Company sells goods to Sunland Company during 2017. It offers Sunland the following rebates based on total sales to Sunland. If total sales to Sunland are 10,300 units, it will grant a rebate
- The Silver Company makes a product that is very popular as a mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below:
- Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below:
- Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below: From
- Harlan Gravity Grips produces spike sets for track shoes. CEO Brittany Harlan has gathered the following information about the company's sales volume and marketing cost for the past six months.
- Delphi Company has developed a new product that will be marketed for the first time during the next fiscal year. Delphi can produce 26,000 units of the new product annually, and they believe that they can sell the product for $30 per unit. The fixed expen
- Tyler Company has been approached by a new customer with an offer to purchase 8,000 units of its product KR200 at a price of $10 each. The existing sales would not be affected by this special order. T
- Tyler Company has been approached by a new customer with an offer to purchase 6,000 units of its product KR200 at a price of $11 each. The existing sales would not be affected by this special order. T
- The Millenium Company has been approached by a new customer with an offer to purchase 10,000 units of its model F80 at a price of $3.90 each. The new customer is geographically separated from the comp
- During a recent management meeting, Steve Micke, director of marketing, proposed that the company begin capitalizing its marketing expenditures as goodwill. In his words, 'Marketing expenditures create goodwill for the company which benefits the company
- ABC Corporation wants to launch one of its mega campaigns to promote a special product The promotion budgets not yet finalized, but they know that some Rs.55,00,000 is available for advertising and promotion. Management wants to know how much they should
- For supply item LK, Boatman Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. The company has hired a new purchasing agent, who wants
- Factor Company is planning to add a new product its line. To manufacture this product the company needs to buy a new Mach ire at a S499.00
- Following a market research study, Long Corporation decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $120. The annual target sales volume for interior
- Vernom Corporation's president has decided to introduce only one of the new products for this coming winter. If the product is a success, further expansion in future years will be initiated. The produ
- Versan Dixon is the supervisor of the Artwell Division of Cygnet Limited. Her annual bonus is based on the success of new products and is computed on the number of sales that exceed each new product's projected breakeven point. In reviewing the computatio
- The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $44,000 machine that would reduce operating costs in its warehouse by $6,400 per year. At t
- The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $31,000 machine that would reduce operating costs in its warehouse by $6,000 per year. At t
- The management of Opry Company, a wholesale distributor of suntan products, is considering the purchase of a $28,000 machine that would reduce operating costs in its warehouse by $5,000 per year. At
- McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $1,100 per set and have a variable cost of $500 per set. The company has spent $164,000 for a marketing study that de
- The following data for Gardot Products Inc. are available: For the Year Ended December 31, 2014 Actual Planned Difference - Increase or (Decrease) Sales $1,460,000 $1,422,900 $37,100 Less: Variable co
- Twyla Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows. CD Units sold8,90019,920 Selling price per unit$94$76
- The marketing department of Graber Corporation has submitted the following sales forecast for the upcoming fiscal year First Quarter Second Quarter
- Division P of Launch Corporation has the capacity for making 80,500 wheelsets per year and regularly sells 65,500 each year on the outside market. The regular sales price is $155 per wheelset, and the
- The management of Nob Hill Company is considering purchasing a new piece of equipment, model RF10, which will significantly increase productivity and efficiency over the current equipment in use. RF10
- 1) The stage in the evolution of new products in which ideas that match company objectives are analyzed as to whether the firm has the required expertise for the product's development and marketing is
- Happy Pots sells custom planters for $150 each. Variable costs are $125 per planter. The Marketing manager thinks that she can increase sales by 500 planters by spending an additional $15,000 on advertising. How much will profit increase or decrease due t
- 1. In order to maintain a sales level consistent with previous years, company management is under increased pressure to increase sales during the last quarter of the year. The marketing department rec
- A new product introduced by Sunbound Promotions carries a two-year warranty against defects. The estimated warranty costs related to dollar sales are as follows: Year of sale 3 percent Year after sale 5 percent Sales and actual warranty expenditures for t
- Companies that switch to ABC often find they have ______. A. been overpricing some products. B. been possibly losing market share to competitors. C. been sacrificing profitability by underpricing some products. D. all of the above.
- Oregon Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 6,000 log-splitting machines per year at a retail
- Oregon Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 5,000 log-splitting machines per year at a retail
- In order to maintain a sales level consistent with previous years, company management is under increased pressure to increase sales during the last quarter of the year. The marketing department recent
- Silver Company makes a product that is vary popular as a Mother's Day gift. Thus, peak sales occur in May of each year. as shown in the company's sales budget for the second quarter given below: From
- Lawler Manufacturing Co. has three divisions which are in competition with each other, selling slightly different products. Annual results (including per unit sales) show: The company believes that if it drops Division B, sales of Division A will incre
- Steven Corporation manufactures fishing poles that have a price of $42.00. It has costs of $32.64. A competitor is introducing a new fishing pole that will sell for $36.00. Management believes it mus
- Belinca Inc. is a shoe retailer. On February 1st, 2013; the company purchased 500 units of a popular new model X shoe for $20 each. On March 3rd, the company purchased 700 units of the newly released Y model shoe for $30 each causing the selling price of
- Twyla Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows. Product C Product D Units sold 9,00
- Ontario Outdoors is a manufacturer of outdoor items. The company is considering the possibility of offering a new sleeping bag that would sell for $150 each. Cost to manufacture these sleeping bags in
- Cracker Corporation began a special promotion in July 2016 in an attempt to increase sales. A coupon was included in various print advertisements. Customers could send in five coupons for a free prize
- Freesure Company manufactures and sells commercial refrigerators. It is currently running a promotion in which it pays a $500 rebate to any customer that purchases a refrigeration unit from one of t it's participating dealers. The rebate must be returned
- Miller Company sells several products. Sales reports show that the sales volume of its most popular product has increased the past three quarters while overall profits have decreased. How might produc
- The following information is for X Company's two products, A and B Assume that if X Company drops Product B, it can use the vacant space to increase sales of Product A by 29,400, but 4,200 of additio
- Detmer Holdings AG of Bern, Switzerland, has just introduced a new fashion watch for which the company is trying to find an optimal selling price, Marketing studies suggest that the company can increa
- END Company is introducing a new product. The product can be manufactured by one of two methods, the choice of which will not affect the quality of the product. The following table summarizes the esti
- Davidson Corp. produces a single product: fireproof safety deposit boxes for home use. The budget going into the current year anticipated a selling price of $61 per unit. Because of competitive pressures, the company had to cut selling prices by 10% durin
Explore our homework questions and answers library
Browse
by subject