Minden Company introduced a new product last year for which it is trying to find an optimal...
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 selling price. The Company's present selling price is $90 per unit, and variable expenses are $60 per unit. Fixed expenses are $837,900 per year. The present annual sales volume (at the $90 selling price) is 26,000 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?
Break-even Point:
Break-even point is the level of unit sales in which the company will neither generate net income or incur net loss. At break-even total costs, variable and fixed expenses, is equal to the total revenues. Units to be sold in excess of break-even point will generate income for the company.
Answer and Explanation: 1
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View this answer1) What is the present yearly net operating income or loss?
| Selling Price | 90 |
| Variable Expenses | 60 |
| Contribution Margin per Unit | 30 |
| Sales Volume | 26,000 |
| Co... |
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Applying Systems of Linear Equations to Breakeven Point: Steps & Example
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Breakeven points are the point of intersection between two linear functions. Explore the steps of how the system of linear equations uses breaking points, and view an example of the business application in determining revenue from cost.
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