Solomon Company is considering adding a new product. The costaccountant has provided the following...

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Accounting

Solomon Company is considering adding a new product. The costaccountant has provided the following data:
Expected variable cost ofmanufacturing $ 43 per unit
Expected annual fixedmanufacturing costs $ 60,000
The administrative vice president has provided the followingestimates:
Expected sales commission $ 5 per unit
Expected annual fixedadministrative costs $ 52,000
The manager has decided that any new product must at least breakeven in the first year.
Required
Use the equation method and consider each requirementseparately.
If the sales price is set at $64, how many units must Solomonsell to break even?
Solomon estimates that sales will probably be 14,000 units. Whatsales price per unit will allow the company to break even?
Solomon has decided to advertise the product heavily and has setthe sales price at $68. If sales are 8,000 units, how much can thecompany spend on advertising and still break even?

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Requirement 1 Let the no of units to break even be x units then at Break even point Sales Variable cost Fixed Cost 0 Net Income 64x 43 5x 60000 52000 0 64x 48x 112000 0 See Answer

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In: AccountingSolomon Company is considering adding a new product. The costaccountant has provided the following data:...Solomon Company is considering adding a new product. The costaccountant has provided the following data:Expected variable cost ofmanufacturing$43per unitExpected annual fixedmanufacturing costs$60,000The administrative vice president has provided the followingestimates:Expected sales commission$5per unitExpected annual fixedadministrative costs$52,000The manager has decided that any new product must at least breakeven in the first year.RequiredUse the equation method and consider each requirementseparately.If the sales price is set at $64, how many units must Solomonsell to break even?Solomon estimates that sales will probably be 14,000 units. Whatsales price per unit will allow the company to break even?Solomon has decided to advertise the product heavily and has setthe sales price at $68. If sales are 8,000 units, how much can thecompany spend on advertising and still break even?


Expected variable cost ofmanufacturing	$	43	per unit
Expected annual fixedmanufacturing costs	$	60,000


Expected sales commission	$	5	per unit
Expected annual fixedadministrative costs	$	52,000