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Problem 5-19 (Algo) Break-Even Analysis; Pricing [LO5-2, LO5-4, LO5-7] Last year Minden Company introduced a new product and sold 14,000 units at a price of
Problem 5-19 (Algo) Break-Even Analysis; Pricing [LO5-2, LO5-4, LO5-7] Last year Minden Company introduced a new product and sold 14,000 units at a price of $72 per unit. The product's variable expenses are $42 per unit and its fixed expenses are $521,400 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., $70, $68, 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 ? Complete this question by entering your answers in the tabs below
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