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Should the company produce the product and why

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Reference no: EM132687195

Your company is thinking of producing a new product, Product N. Similar products exist in the market and sell for $190 per unit. You estimate that each unit will cost $70 in variable costs, such as direct materials and direct labour. If the company makes this product, it will incur annual fixed costs of $420,000.

Required

Problem 1. Calculate the breakeven point in units

Problem 2. Assume the company conducted market research and learned that demand for the products is expected to be around 5,600 unites per year.
1. Should the company produce this product?
2. Why?

Problem 3. This time assume the company conducted market research and learned that demand for the product was unlikely to exceed 3,600 units per year.
1. Should the company produce this product?
2. Why?

Reference no: EM132687195

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