Assignment:
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company's present selling price is $98 per unit, and variable expenses are $68 per unit. Fixed expenses are $833,700 per year. The present annual sales volume (at the $98 selling price) is 25,200 units.
Requirement 1: What is the present yearly net operating income or loss? (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)
Requirement 2: What is the present break-even point in units and in dollar sales? (Omit the "$" sign in your response.)
Requirement 3: Assuming that the marketing studies are correct, what is the maximum profit that the company can earn yearly? At how many units and at what selling price per unit would the company generate this profit? (Omit the "$" sign in your response.)
Requirement 4: What would be the break-even point in units and in sales dollars using the selling price you determined in requirement (3) above (e.g., the selling price at the level of maximum profits)? (Omit the "$" sign in your response.)