Atherton Foods is assessing the economic worthiness of entering a new market. Market research has determined that they could expect to sell 10,000 pallets of their canned corn in the new market. They sell the corn for $100 per pallet. The average variable cost per pallet for them is $60. To supply the new market they must buy warehouse space costing $200,000.
1. What is the break-even point in pallets of corn in this market?
2. What is break-even point in dollar sales in this new market?
3. If the firm must make a 15 percent profit on sales to enter this market, how many pallets of corn must they sell sell to achieve this objective?
4. If an advertising campaign costing $50,000 is needed in the new market to introduce the corn, how many pallets of corn must be sold to cover the cost of the ads?
5. If they sell the expected number of pallets, what price do they need to charge to break-even at the quantity?