What is the break-even quantity for this product

Assignment Help Management Theories
Reference no: EM13918084

Please provide step by step so I can understand the process and use this for future reference.

1) Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment. Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000

a. If the selling price is set at $18 each, how many units must be produced and sold for Williams to break even? Use both graphic and algebraic approach to get your answer.

b. Williams forecasts sales of 10,000 units for the first year if the selling price is set at $16.00 each. What would be the total contribution to profits from this new product during the first year?

c. If the selling price is set at $12.50, Williams forecasts that first-year sales would increase to 15,000 units. Which pricing strategy ($14.00 or $12.50) would result in the greater total contribution to profits?

d. What other considerations would be crucial to the final decision about making and marketing the new product?

2) A product at the Jennings Company has enjoyed reasonable sales volumes, but its contributions to profits were disappointing. Last year, 17,500 units were produced and sold. The selling price is $22 per unit, the variable cost is $18 per unit, and Fix cost is $80,000.

a. What is the break-even quantity for this product? Use both graphic and algebraic approach to get your answer.

b. If sales were not expected to increase, by how much would Jennings have to reduce their variables cost to break even?

c. Jennings believes that $1 reduction in price will increase sales by 50 percent. Is this enough for Jennings to break even? If not, by how much would sales have to increase?

d. Jennings is considering ways to either stimulate sales volume or decrease variable costs. Management believes that either sales can be increased by 30 percent or that variable cost can be reduced to 85 percent of its current level. Which alternative leads to higher contributions to profits, assuming that each is equally costly to implement? (Hint: Calculate profits for both alternatives and identify the one having the greatest profits.)

e. What is the percent change in the per-unit profit contribution generated by each alternative in part b?

3) An interactive television service that costs $10 per month to provide can be sold on the information highway for $15 per client per month. If a service are includes a potential of 15,000 customers, what is the most a company could spend on annual fixed cost to acquire and maintain the equipment?

4) A restaurant is considering adding a fresh book trout to its menu. Customers would have the choice of catching their own trout from a simulated mountain stream or simply asking the waiter to net the trout for them. Operating the stream would require $10,600 in fix costs per year. Variable costs are estimated to be $6.70 per trout. The firm wants to break even if 800 trout dinners are sold per year. What should be the price of the new item?

5) Spartan Castings must implement a manufacturing process that reduces the amount of particulates emitted into the atmosphere. Two processes have been identified that provide the same level of particulate reduction. The first process is expected to incur $350,000 of fixed cost and add $50 of variable cost to each casting Spartan produces. The second process has fixed costs of $150,000 and adds $90 of variable cost per casting.

a. What is the break-even quantity beyond which the first process is more attractive?

b. What is the difference in total cost if the quantity produced is 10,000?

Reference no: EM13918084

Questions Cloud

Segmentation and target market paper : Write a white paper on a company of your choice and discuss the market segmentation within that industry along with the target market for the company and the selection process for that target market.
Being a barrier to hostile takeovers : Which of the following is NOT normally regarded as being a barrier to hostile takeovers?
Conducting criminal justice research : How can not knowing the proper terminology affect you as you conduct criminal justice research?
Evaluate the models and methods used to support coaching : Evaluate the models and methods used to support coaching and mentoring and justify an appropriate design for your talent development programme.
What is the break-even quantity for this product : Williams forecasts sales of 10,000 units for the first year if the selling price is set at $16.00 each. What would be the total contribution to profits from this new product during the first year?
If there is find a strategy to get positive gain : For a stock, initial price is 100, the price of a put option is 3, the price of a call option is 5, and exercise time is 3 months and exercise price is 80, nominal interest rate is 10%. Decide if there is arbitrage and why? If there is find a strateg..
Potential penalty for breaking a contract : 1) To protect against lawsuits brought by anyone injured by your product, you will need to buy ________. 2) Which is not a potential penalty for breaking a contract?
Bonds make semiannual payments-bonds currently sell : Heginbotham Corp. issued 20-year bonds two years ago at a coupon rate of 8.9 percent. The bonds make semiannual payments. If these bonds currently sell for 110 percent of par value, what is the YTM?
Napoleon incorporated presents its statement of cash flows : Napoleon Incorporated presents its statement of cash flows using the indirect method.

Reviews

Write a Review

 

Management Theories Questions & Answers

  Create organizational improvement outcomes

Create organizational improvement outcomes that are a direct remedy to the organizational issues. Apply human behavior theories and concepts and validate your recommendations with supportive research evidence.

  Reflect on why some products become substitutes

Reflect on why some products become substitutes and why some are complements (e.g. hot dogs and hot dog buns).

  You make a really solid point in noting that traditional

you make a really solid point in noting that traditional organizations are not able to transform into a lean

  One area of leadership that you discuss in your analysis is

one area of leadership that you discuss in your analysis is that of open communication. elaborate on and share my own

  Explain social constructivist approaches to leadership

Analyze Grint's support for why it is helpful to study Constitutive/Social Constructivist approaches to leadership and give your critical assessment of why case he presents is compelling or not.

  Global human resource management differ from domestic

How does global human resource management differ from domestic human resource management?How will you handle the following Language Barriers?

  What character traits are essential for a leader or manager

What character traits are essential for a leader or manager and what differences do you see between your personal and professional values? What are the implications of those differences?

  Cubbie group is reportedly the largest water license holder

Cubbie Group is reportedly the largest water license holder and commercial agricultural operation on the Murray-Darling Basin, with a cotton growing enterprise that spans two main properties located near Dirranbandi and St George in south-west Queens..

  Interplay between user expectations of privacy

Privacy is not only something that ICT users have come to expect; it is, in many cases, a legally protectable right. As IT professionals, it is your responsibility to understand the interplay between user expectations of privacy and the law.

  Advanced cardiac failure

Scenario:Ferdinand Hartwig is an 85 y.o man diagnosed with advanced cardiac failure.Ferdinand is a widower with no children. His wife, Jeike, died over thirty years ago during childbirth and he never decided to remarry.

  Microsoft windows media player vs. real networks

Microsoft’s Windows Media Player vs. Real Networks.

  How would analysis change if more than quality levelslemons

How would your analysis change if there are more than two quality levelslemons, intermediates, and good-quality cars? Explain your answer in detail.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd