The marketing department at High-tech Inc. is getting ready to launch a new product. Before doing...

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The marketing department at High-tech Inc. is getting ready tolaunch a new product. Before doing so, they have to finalize thebusiness case to present to the executives.  The sellingprice is expected to be $45.  The costinformation for the new product is as follows:
Overheadexpenses                              $400,000
Advertising                                               $200,000
Rawmaterials                                         $8.25/unit
Patentroyalties                                     $1.85/unit
Salescommission                                 $2/unit
Salespersonsalaries                            $475,000
a. What is the contribution margin per unit?
b. What volume must be sold for High-tech Inc. to break even(both in units and dollar)?
c. What is the volume in units that must be sold for the firm tomake $600,000 in profit?
d. What happens to the break-even volume if managers decide toreduce the price by 18%?
e. What happens to the break-even volume if extra salespeopleneed to be hired (with a cost of $45,000)?

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3.7 Ratings (376 Votes)

A Contribution sales variable expenses Ie Contribution margin contribution sales100 32945100 7311 refer working note B Break even point is a point where there is no profit and no See Answer

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The marketing department at High-tech Inc. is getting ready tolaunch a new product. Before doing so, they have to finalize thebusiness case to present to the executives. The sellingprice is expected to be $45. The costinformation for the new product is as follows:Overheadexpenses $400,000Advertising $200,000Rawmaterials $8.25/unitPatentroyalties $1.85/unitSalescommission $2/unitSalespersonsalaries $475,000a. What is the contribution margin per unit?b. What volume must be sold for High-tech Inc. to break even(both in units and dollar)?c. What is the volume in units that must be sold for the firm tomake $600,000 in profit?d. What happens to the break-even volume if managers decide toreduce the price by 18%?e. What happens to the break-even volume if extra salespeopleneed to be hired (with a cost of $45,000)?