Thomlinson Company is considering the development of two products: no. 765 or no. 766. Manufacturing cost information follows.
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No. 765
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NO. 766
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Annual Fixed Costs
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$250,000
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$350,000
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Variable cost per unit
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$35
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$25
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Regardless of which product is introduced, the anticipated selling price will be $60 and the company will pay a 10% sales commission on gross dollar sales. Thomlinson will not carry an inventory of these items.
A. What is the break-even sales volume (in dollars) on product no. 766?
B. Which of the two products will be more profitable at a sales level of 20,000 units?
C. At what unit-volume level will the profit/loss on product no. 765 equal the profit/loss on product no. 766?