Millard, Inc., sold 68,000 computer printers last year with the following results.

Complete each of the following instructions independently of the others.

Instructions:

1. Millard projects that it can sell 75,000 printers next year at the current \($250.00\) unit sales price. However, management believes that it can increase net income by selling its printer below the unit sales price of its competitors. Millard’s marketing department projects that it could sell 100,000 printers at a unit sales price of \($230.00\). Calculate the projected net income. Should Millard reduce the unit sales price to \($230.00?\)
Explain your answer.

2. Millard currently purchases the power cable from another manufacturer at a cost of \($7.00\) per unit. The company is considering producing the cable. Millard projects that it can produce the cable for \($2.00\) each plus annual fixed costs of \($240,000.00\). Calculate the projected net income assuming a sales volume of 75,000 printers. Should Millard produce the power cables? Explain your answer.

Transcribed Image Text:

Millard, Inc. Income Statement For Year Ended December 31, 20-- Net Sales (68,000 units @ $250.00) Less Variable Costs (68,000 units @ $200.00). Contribution Margin. Less Fixed Costs Net Income $17,000,000.00 13,600,000.00 $ 3,400,000.00 2,980,000.00 420,000.00