er 5HW 6 Check my Minden Company introduced a new product la

er 5-HW 6 Check my Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest $93 per unit, and variable expenses are $63 per unit. Fixed expenses are $838.200 per year. The present annual sales volume (at the $93 selling price) is 25,300 units. Required: 1. What is the present yearly net operating income or loss? ook 2. What is the present break-even point in unit sales and in dollar sales? 3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit? ences 4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g, the selling price at the level of maximum profits)? Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3 Required 4 What is the present yearly net operating income or loss? Required 2> Prev 1 of 5 Next

Solution

Answer

A

Units Sold

25300

B

Sale Price per unit

93

C

Variable expenses per unit

63

D=B-C

Contribution margin per unit

30

E=A x D

Total contribution margin

759000

F

Fixed expenses

838200

G=E-F

Net operating Income (Loss)

(79200)

A

Fixed expenses

838200

B

Contribution margin per unit

30

C=A/B

Break Even point in Unit Sales

27940

D

Sale Price per unit

93

E=C x D

Break Even point in Dollar Sales

$ 2598420

Sno.

Sale Price per unit (A)

Units Sold (B)

Variable Cost per unit (C )

Contribution per unit (D=A-C)

Total contribution (E=B x D)

Fixed Expenses (F)

Net Operating Income/(loss) [G=E-F]

1

93

25300

63

30

759000

838200

-79200

2

91

30300

63

28

848400

838200

10200

3

89

35300

63

26

917800

838200

79600

4

87

40300

63

24

967200

838200

129000

5

85

45300

63

22

996600

838200

158400

6

83

50300

63

20

1006000

838200

167800

7

81

55300

63

18

995400

838200

157200

8

79

60300

63

16

964800

838200

126600

9

77

65300

63

14

914200

838200

76000

10

75

70300

63

12

843600

838200

5400

11

73

75300

63

10

753000

838200

-85200

12

71

80300

63

8

642400

838200

-195800

It is clear from above working that at Selling Price of $83 per unit, company will earn maximum Net Income.

Maximum income that can be earn = $ 167800, at 50300 units sold at $83 per unit.

A

Fixed expenses

838200

B

Contribution margin per unit [83 – 63]

20

C=A/B

Break Even point in Unit Sales

41910

D

Sale Price per unit

83

E=C x D

Break Even point in Dollar Sales

3478530

A	Units Sold	25300
B	Sale Price per unit	93
C	Variable expenses per unit	63
D=B-C	Contribution margin per unit	30
E=A x D	Total contribution margin	759000
F	Fixed expenses	838200
G=E-F	Net operating Income (Loss)	(79200)