b. ASGC is also considering adding tennis racquets to the product lines it produces.

This would require a $500,000 modification to its factory as well as the purchase of new equipment that costs $1,600,000. The variable cost to produce a tennis racquet would be $55, but John thinks that ASGC could sell the racquet at a wholesale price of $82.

John thinks that if ASGC sells the racquet at a lower price, many other retailers might decide to carry it. However, the vice president of ASGC thinks that the tennis racquet is a superior product and that ASGC should sell it for $99.99 to upscale country clubs only. The higher price would give a prestige image.

Questions based on the above (10 pts)

7. If ASGC produces tennis racquets, how many racquets must it sell at $82.00 and $99.99 to break even?

Breakeven units at 82.00 _______________________________. (3pts)

Breakeven units at 99.99 _______________________________. (3pts)

Which price do you recommend and why? __________________________ (2pts)

If ASGC wants to make at least $40,000 profit off the racquets, at a selling price of $82.00 what would the breakeven quantity be__________________________ (2pts)