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Minden Company introduced a new product last year for which it is trying to find an...

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Accounting

Minden Company introduced a new product last year for which itis trying to find an optimal selling price. Marketing studiessuggest that the company can increase sales by 5,000 units for each$2 reduction in the selling price. The company’s present sellingprice is $94 per unit, and variable expenses are $64 per unit.Fixed expenses are $834,900 per year. The present annual salesvolume (at the $94 selling price) is 25,700 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 indollar sales?

3. Assuming that the marketing studies are correct, what is themaximum annual profit that the company can earn? At how many unitsand at what selling price per unit would the company generate thisprofit?

4. What would be the break-even point in unit sales and indollar sales using the selling price you determined in (3) above(e.g., the selling price at the level of maximum profits)?

Answer & Explanation Solved by verified expert
3.7 Ratings (416 Votes)
1 Sale 25700 units X 94 2415800 Less Variable cost 25700 units X 64 1644800 Contribution margin 771000 Less Fixed cost 834900 Net operating Income loss 63900 2 Break even point in units Total Fixed cost Contribution Margin Per    See Answer
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