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3.39 (LO 1, 3, 5) Breakeven analysis; multiproduct CVP analysis Herzog Industries sells two electrical components with the following characteristics. Fixed costs for the company
3.39 (LO 1, 3, 5) Breakeven analysis; multiproduct CVP analysis Herzog Industries sells two electrical components with the following characteristics. Fixed costs for the company are $200,000 per year.
XL-709 | CD-918 | |
Sales price | $15.00 | $38.00 |
Variable cost | 10.00 | 24.00 |
Sales volume | 30,000 units | 75,000 units |
Required
- How many units of each product must Herzog Industries sell in order to break even?
- Herzogs vice president of sales has determined that due to market changes, the sales price of component XL-709 can be increased to $25.00 with no impact on sales volume. What will be Herzogs new breakeven point in units?
- Returning to the original information, Herzogs vice president of marketing believes that spending $58,500 on a new advertising campaign will increase sales of component CD-918 to 90,000 units without affecting the sales of product XL-709. How many units of each product must Herzog sell to break even under this new scenario?
- The market changes referred to in part (b) indicate additional overall demand for component XL-709. Herzogs vice president of marketing believes that if the company spends $58,500 to advertise component XL-709 rather than CD-918, as planned in part (c), the company will be able to sell a total of 50,000 units of XL-709 at the new price of $25.00. If the company must choose to advertise only one component, which component should receive the additional $58,500 in advertising?
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