1. Last year Minden Company introduced a new product and sold 16,000 units at a price of $74 per unit. The product's variable expenses are $44 per unit and its fixed expenses are $522,600 per year.

Required:

1. What was this product's net operating income (loss) last year?
2. What is the product's break-even point in unit sales and dollar sales?
3. Assume the company conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g., $72, $70, etc.), what is the maximum annual profit it can earn on this product? What sales volume and selling price per unit generate the maximum profit?
4. What would be the break-even point in unit sales and dollar sales using the selling price you calculated in requirement 3?

2. Gold Star Rice, Limited, of Thailand exports Thai rice throughout Asia. The company grows three varieties of riceWhite, Fragrant, and Loonzain. Budgeted sales by product and in total for the coming month are shown below:

	Product
White	Fragrant	Loonzain	Total
Percentage of total sales	48%		20%		32%		100%
Sales	$ 350,400	100%	$ 146,000	100%	$ 233,600	100%	$ 730,000	100%
Variable expenses	105,120	30%	116,800	80%	128,480	55%	350,400	48%
Contribution margin	$ 245,280	70%	$ 29,200	20%	$ 105,120	45%	379,600	52%
Fixed expenses							228,800
Net operating income							$ 150,800

Dollar sales to break-even = Fixed expenses CM ratio = $228,800 0.52 = $440,000

As shown by these data, net operating income is budgeted at $150,800 for the month and the estimated break-even sales is $440,000.

Assume actual sales for the month total $730,000 as planned; however, actual sales by product are White, $233,600; Fragrant, $292,000; and Loonzain, $204,400.

Required:

1. Prepare a contribution format income statement for the month based on the actual sales data.
2. Compute the break-even point in dollar sales for the month based on your actual data.