The Companys projected volume of production is 3,000 units of the product ABC per month. Standard selling price of product ABC per unit amounts to EUR 4,350. The monthly costs of manufacturing and marketing the product ABC are shown in Table 1.

Table 1. Product ABC, costs per unit.

Unit manufacturing costs:

Variable materials EUR 550

Variable labor EUR 825

Variable overhead EUR 420

Fixed overhead EUR 660

Total unit manufacturing costs EUR 2,455

Unit marketing costs:

Variable EUR 275

Fixed EUR 770

Total unit marketing costs EUR 1,045

Total unit costs EUR 3,500

Ignoring the effect of income taxes, please address the following questions.

1. Please determine the break-even volume in units and in sales currency.
2. The Company considers entering a foreign market that is considered price sensitive due to an assumption that the foreign market is counter-cyclical to home market, i.e., idle production facilities would be used without affecting home market sales. The Company is considering an order below regular sales price for 1,000 units in order to enter the selected foreign market. Transportation costs for the order would amount to EUR 500 per unit, total marketing costs would be EUR 20,000. Please determine the minimum unit price for this order.
3. After a stock count, 100 units of obsolete product ABC are identified. Management of the Company estimates that these units need to be sold through regular channels at reduced prices or, alternatively, these units need to be scrapped. Please determine the minimum acceptable selling price for these units.
4. The Company is considering a proposal of an outside contractor that proposes to make 1,000 units per month and deliver directly to the Companys customers. The Company estimates that its fixed marketing costs would not be affected; however, variable marketing costs would be reduced to EUR 220 per unit for the units produced by the contractor. The production capacity of the Company would be used at 2/3 level and therefore total fixed manufacturing costs would be reduced to EUR 1,386,000. Please determine the in-house unit cost to be compared to the proposed unit cost by the contractor of EUR 2,475 per unit.
5. The Company is considering a proposal of an outside contractor that proposes to make 1,000 units per month and deliver directly to the Companys customers. The Company estimates that its fixed marketing costs would not be affected; however, variable marketing costs would be reduced to EUR 220 per unit for the units produced by the contractor. By accepting the proposal of the contractor, the Company would be able to use idle production capacity to produce 800 units of modified product ABC per month at an increase sales price of EUR 4,950 per unit. In this case, the variable manufacturing costs would be EUR 3,025 per unit and the variable marketing costs would be EUR 550 per unit. Fixed marketing and manufacturing costs would not be affected under each of the alternative scenarios: (1) manufacture 3,000 units of regular product ABC or (2) manufacture 2,000 units of regular product ABC and 800 units of modified product ABC. Please determine the in-house unit cost to be compared to the proposed unit cost by the contractor of EUR 2,475 per unit.
6. According to the market research, monthly production volume can be increased to 3,500 units given that the price is reduced from EUR 4,350 to EUR 3,850 per unit. Assuming there are no capacity constraints to produce 3,500 units, would you recommend to accept this scenario? Please determine the impact on monthly sales, costs, and income.