PLEASE ONLY DO NUMBER 4

this is the answer i got please plug it into the format above

4)

First we need to find out the existing Plant Overheads and its allocation to the Existing Product (EP) and the New Product (NP).

The Total Fixed Cost is $80 Mn., out of which $10 Mn. is towards Sales Force Expenses. So the Plant Overheads are $70 Mn. of which $63 Mn. (90%) is allocated to EP and $7Mn. (10%) is allocated to NP.

	PRESENT SCENARIO
	EP	NP	Total
Present Fixed Cost	68	12	80	Mn $
Sales Force Exp	5	5	10	Mn $
Plant OH	63	7	70	Mn $
	90%	10%	100%

The MSRP of NP is $4.99 per unit from which 35% is to be deducted on account of Volume Discounts and 20% on account of Promotional Allowance. The Net Realised Price is $2.2455 / unit.

By deducting the Unit Cost of $ 0.99, we arrive at the Unit Contribution of $1.2555.

	PRESENT SCENARIO
	EP	NP	Total
MSRP	5.39	4.99		$
Less Vol. Discount	1.8865	1.7465		$
	35%	35%
Less: Prom. All.	0.8085	0.998		$
	15%	20%
Net Realised Price	2.695	2.2455		$
Unit Cost	1.49	0.99		$
Unit Contribution	1.205	1.2555		$
Break Even units		25.49		Mn. Units

Break Even = Fixed Costs/Unit Contribution

= 32 Mn./ 1.2555 = 25.49 Mn. Units

The Revised Plant Overheads, after increasing by $10 Mn. is $80 Mn., of which $64 Mn. (80%) is allocated to EP and $16 Mn. (20%) is allocated to NP.

By adding the Sales Force and Advt. & Sales Promotion Overheads, the Total Fixed cost of NP is $45 Mn.:

	REVISED SCENARIO
	EP	NP	Total
Revised Fixed Cost	68	12	80	Mn $
Sales Force Exp	5	5	10	Mn $
Plant OH	64	16	80	Mn $
	80%	20%	100%
Advt & Sales Prom	25	20	45	Mn $
Total Fixed Cost	94	41	135	Mn $

	REVISED SCENARIO
	EP	NP	Total
MSRP	5.39	4.99		$
Less Vol. Discount	1.8865	1.7465		$
	35%	35%
Less: Prom. All.	0.8085	0.998		$
	15%	20%
Net Realised Price	2.695	2.2455		$
Unit Cost	1.49	0.99		$
Unit Contribution	1.205	1.2555		$
Break Even units		32.66		Mn. Units

Break Even = Fixed Costs/Unit Contribution

= 41 Mn./ 1.2555 = 32.66 Mn. Units

Hence, by increasing the Plant Capacity and re-allocating the Overheads, the Break Even for the New Product increases by 7.17 Mn. Units (from 25.49 Mn. Units to 32.66 Mn. Units)

MSRP Volume Discount Unit Cost Promotional Allowance Advertising & Promotion Allocated Fixed Costs Projected Unit Sales Existing Product $5.39 35% $1.49 15% $25M $68M 115M New Product $4.99 35% $0.99 20% $20M $12M 10M Break Even Analyst 1. In the table above, why do the fixed costs for sales force, plant, and administrative costs need to be allocated to each product? Why are advertising and promotion expenses shown separately from the allocated amount? 2. Calculate the break-even units for each product, showing the Intermediate calculations for the total fixed costs, selling prices, and unlt varlable costs. Exlsting Product New Product Total Fixed Cost Unit Selling Price Unit Varlable Cost Break-Even Units 3. How might the results of your break-even calculation affect the marketing of the new product? What other factors besides break-even should you consider? 4. Production anticipates it will need to Increase capaclty to 140 million unlts, adding $10.0 million to annual fixed costs. If the product allocation of the plant cost is also changed to 80%/20%, what is the Impact on break-even units? Existing Product New Product Total Fixed Cost Unit Selling Price Unit Varlable Cost Break-Even Units Show transcribed image text MSRP Volume Discount Unit Cost Promotional Allowance Advertising & Promotion Allocated Fixed Costs Projected Unit Sales Existing Product $5.39 35% $1.49 15% $25M $68M 115M New Product $4.99 35% $0.99 20% $20M $12M 10M Break Even Analyst 1. In the table above, why do the fixed costs for sales force, plant, and administrative costs need to be allocated to each product? Why are advertising and promotion expenses shown separately from the allocated amount? 2. Calculate the break-even units for each product, showing the Intermediate calculations for the total fixed costs, selling prices, and unlt varlable costs. Exlsting Product New Product Total Fixed Cost Unit Selling Price Unit Varlable Cost Break-Even Units 3. How might the results of your break-even calculation affect the marketing of the new product? What other factors besides break-even should you consider? 4. Production anticipates it will need to Increase capaclty to 140 million unlts, adding $10.0 million to annual fixed costs. If the product allocation of the plant cost is also changed to 80%/20%, what is the Impact on break-even units? Existing Product New Product Total Fixed Cost Unit Selling Price Unit Varlable Cost Break-Even Units Show transcribed image text