Barkov Bakeries produces deluxe muffins in its manufacturing facility in Florida. Data concerning these products appear below. Cornbread Blueberry Plain Normal annual sales volume 200,000 300,000 500,000 Unit selling price $ 2.50 $ 3.00 $ 2.00 Variable cost per unit $ 1.80 $ 2.00 $ 1.40 Total fixed expenses for the entire company are $2,500,000 per year. All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. The company has no work in process or finished goods inventories due to an extremely effective just-in-time manufacturing system. Required: What is the company's overall break-even point in total sales dollars? Marketing believes that if $500,000 is spent on advertising to create higher brand awareness, the normal sales volume for each product will increase by 20 percent. Show computations to indicate whether or not the $500,000 in advertising should be spent.
Barkov Bakeries produces deluxe muffins in its manufacturing facility in Florida. Data concerning these products appear below.
Cornbread Blueberry Plain
Normal annual sales volume 200,000 300,000 500,000
Unit selling price $ 2.50 $ 3.00 $ 2.00
Variable cost per unit $ 1.80 $ 2.00 $ 1.40
Total fixed expenses for the entire company are $2,500,000 per year.
All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers.
The company has no work in process or finished goods inventories due to an extremely effective just-in-time manufacturing system.
Required:
- What is the company's overall break-even point in total sales dollars?
- Marketing believes that if $500,000 is spent on advertising to create higher brand awareness, the normal sales volume for each product will increase by 20 percent. Show computations to indicate whether or not the $500,000 in advertising should be spent.
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