For this assignment suppose that a firm has an existing product with a combined advertising...
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Accounting
For this assignment suppose that a firm has an existing product with a combined advertising and promotion budget of $25.0 million and with projected sales of 115 million units. They are launching a new product with a budget of $20.0 million and estimated sales of 10 million unitsin the first year. The sales force expense of $10 million has been allocated equally between products; 90% of the plant overhead has been allocated to the existing product, and 10%, to the new product. Additional values for each product are shown in the table below.
Existing Product
New Product
MSRP
$5.39
$4.99
Volume Discount
35%
35%
Unit Cost
$1.49
$0.99
Promotional Allowance
15%
20%
Advertising & Promotion
$25M
$20M
Allocated Fixed Costs
$68M
$12M
Projected Unit Sales
115M
10M
Calculate the break-even units for each product, showing the intermediate calculations for the total fixed costs, selling prices, and unit variable costs. Show work.
Existing Product
New Product
Total Fixed Cost
Unit Selling Price
Unit Variable Cost
Break-Even Units
2. How might the results of your break-even calculation affect the marketing of the new product?
Answer & Explanation
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