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Finch Company is considering adding a new product. The cost accountant has provided the following data: Expected variable cost of manufacturing $46 per unit Expected
Finch Company is considering adding a new product. The cost accountant has provided the following data:
Expected variable cost of manufacturing | $46 | per unit |
---|---|---|
Expected annual fixed manufacturing costs | $83,000 |
The administrative vice president has provided the following estimates:
Expected sales commission | $7 | per unit |
---|---|---|
Expected annual fixed administrative costs | $45,000 |
The manager has decided that any new product must at least break even in the first year.
Required
Use the equation method and consider each requirement separately.
- If the sales price is set at $69, how many units must Finch sell to break even?
- Finch estimates that sales will probably be 16,000 units. What sales price per unit will allow the company to break even?
- Finch has decided to advertise the product heavily and has set the sales price at $72. If sales are 7,000 units, how much can the company spend on advertising and still break even?
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