Question

Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $92 per unit, and variable expenses are $62 per unit. Fixed expenses are $834,000 per year. The present annual sales volume (at the $92 selling price) is 25,600 units. Required: 1. What is the present yearly net operating income or loss? Net operating loss | $ 71,400

Answer 1

Answer 1:

Net operating loss

$      66,000.00

Explanation:

Income statement
	Present
Sales	$ 2,355,200.00
Less: variable Cost	$ 1,587,200.00
Contribution	$    768,000.00
Less: Fixed Cost	$    834,000.00
Net Income	$    (66,000.00)

Answer 2:

Break-even point in units	$      27,800.00
Break-even point in dollar sales	$ 2,557,600.00

Explanation:

Fixed cost (A)	$    834,000.00
Contribution per unit (B)	$              30.00
Break even point in units (A/B)	27,800.00
Selling price	$              92.00
Break-even point in dollar sales	$ 2,557,600.00

Answer 3:

Maximum profit	$    178,000.00
Number of units	50,600.00
Selling price	$              82.00

Income statement
	Proposed
Sales	$ 4,149,200.00
Less: variable Cost	$ 3,137,200.00
Contribution	$ 1,012,000.00
Less: Fixed Cost	$    834,000.00
Net Income	$    178,000.00

Explanation:

Answer 4:

Break-even point in units	41,700.00
Break-even point in dollar sales	$ 3,419,400.00

Fixed cost (A)	$    834,000.00
Contribution per unit (B)	$              20.00
Break-even point in units (A/B)	41,700.00
Selling price	$              82.00
Break-even point in dollar sales	$ 3,419,400.00

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