1.Sam Lucarelli, owner of Lucarelli Products, is evaluating whether to produce 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 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 Lucarelli to break even? Use both the graphical and algebraic approaches to get your answer.
b)Lucarelli forecasts sales of 10,000 units for the first year if the selling price is set at $14 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, Lucarelli forecasts the first-year sales would increase to 15,000 units. Which price 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?