Last year Minden Company introduced a new product and sold 15,500 units at a price of $74 per unit. The product's variable expenses are $44 per unit and its fixed expenses are $517,800 per year. Required: 1. What was this product's net operating income (loss) last year? 2. What is the product's break-even point in unit sales and dollar sales? 3. Assume the company conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g., $72, $70, etc.), what is the maximum annual profit it can earn on this product? What sales volume and selling price per unit generate the maximum profit? 4. What would be the break-even point in unit sales and dollar sales using the selling price you calculated in requirement 3?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Last year Minden Company introduced a new product and sold 15,500 units at a price of $74 per unit. The
product's variable expenses are $44 per unit and its fixed expenses are $517,800 per year.
Required:
1. What was this product's net operating income (loss) last year?
2. What is the product's break-even point in unit sales and dollar sales?
3. Assume the company conducted a marketing study that estimates it can increase annual sales of this
product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price
reductions in increments of $2 (e.g., $72, $70, etc.), what is the maximum annual profit it can earn on this
product? What sales volume and selling price per unit generate the maximum profit?
4. What would be the break-even point in unit sales and dollar sales using the selling price you calculated in
requirement 3?
Transcribed Image Text:Last year Minden Company introduced a new product and sold 15,500 units at a price of $74 per unit. The product's variable expenses are $44 per unit and its fixed expenses are $517,800 per year. Required: 1. What was this product's net operating income (loss) last year? 2. What is the product's break-even point in unit sales and dollar sales? 3. Assume the company conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g., $72, $70, etc.), what is the maximum annual profit it can earn on this product? What sales volume and selling price per unit generate the maximum profit? 4. What would be the break-even point in unit sales and dollar sales using the selling price you calculated in requirement 3?
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