Answered step by step
Verified Expert Solution
Question
1 Approved Answer
SETTING SALES PRICE AND COMPUTING THE BREAK-EVEN POINT Ionic Charge, is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per
SETTING SALES PRICE AND COMPUTING THE BREAK-EVEN POINT Ionic Charge, is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per year of a new product. The following estimates have been made of the company's costs and expenses (other than income taxes): Instructions a. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $700,000 by producing and selling 60,000 units during the first year of operations? (Hint: First compute the required contribution margin per unit.) b. At the unit sales price computed in part a, how many units must the company produce and sell to break even? (Assume all units produced are sold.) c. What will be the margin of safety (in dollars) if the company produces and sells 60,000 units at the sales price computed in part a? d. Assume that the marketing manager thinks that the price of this product must be no higher than $60 to ensure market penetration. Will setting the sales price at $60 enable lonic Charge to break even, given the plans to manufacture and sell 60,000 units? Explain your
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started