The Duracell Company has been selling 20,000 two-D-cell packages per year to retailers in Brazil for $0.58 per package. The company sells the same packages to retailers in the United States for $1.20 per package. Assume that the company’s variable costs for producing these batteries is $0.40 per package and all selling prices are FOB-origin.
(a) Calculate the breakeven sales level for a $0.10 increase in the price of this battery package in Brazil.
(b) Say it is discovered that several of the Brazilian retailers have been carrying out unauthorized resale of these battery packages in the United States. Market research has determined that each one-package decrease of battery sales in Brazil results in a 0.15-package increase in authorized battery sales in the United States. Given this information, recalculate the breakeven analysis described in Part (a).
(c) Explain the implications of the difference in the BE levels calculated in Parts (a) and (b).