Division C is interested in increasing the sales of Product Z. The present selling price of Product Z is $28.00. Advertising expenditures can be either $100; $200; $300; $400; or $500 (all are in thousands). Sales amount is 20000; 29000; 37000; 44000; or 50000 (resp). How much advertising would you use if the cost of producing the item is $23.60 per item?

Division C is interested in increasing the sales of Product Z. The present selling price of Product Z is $28.00. Advertising expenditures can be either $100; $200; $300; $400; or $500 (all are in thousands). Sales amount is 20000; 29000; 37000; 44000; or 50000 (resp). How much advertising would you use if the cost of producing the item is $23.60 per item?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...

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Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
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