Mary Williams, owner of Williams Products, is evaluatingwhether to introduce a new product line. After thinkingthrough the production process and the costs of raw materi-als and new equipment, Williams estimates the variable costsof each unit produced and sold at $6 and the fixed costs peryear at $60,000.a. If the selling price is set at $18 each, how many unitsmust be produced and sold for Williams to break even?Use both graphic and algebraic approaches to get youranswer.b. Williams forecasts sales of 10,000 units for the first year ifthe selling price is set at $14 each. What would be the totalcontribution to profits from this new product during thefirst year?c. If the selling price is set at $12.50, Williams forecasts thatfirst-year sales would increase to 15,000 units. Which pric-ing strategy ($14.00 or $12.50) would result in the greatertotal contribution to profits?d. What other considerations would be crucial to the finaldecision about making and marketing the new product?
Mary Williams, owner of Williams Products, is evaluating
whether to introduce a new product line. After thinking
through the production process and the costs of raw materi-
als and new equipment, Williams estimates the variable costs
of each unit produced and sold at $6 and the fixed costs per
year at $60,000.
a. If the selling price is set at $18 each, how many units
must be produced and sold for Williams to break even?
Use both graphic and algebraic approaches to get your
answer.
b. Williams
the selling price is set at $14 each. What would be the total
contribution to profits from this new product during the
first year?
c. If the selling price is set at $12.50, Williams forecasts that
first-year sales would increase to 15,000 units. Which pric-
ing strategy ($14.00 or $12.50) would result in the greater
total contribution to profits?
d. What other considerations would be crucial to the final
decision about making and marketing the new product?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
