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

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Accounting

Vernon Company is considering adding a new product. The costaccountant has provided the following data:
Expected variable cost ofmanufacturing $ 42 per unit
Expected annual fixedmanufacturing costs $ 70,000
The administrative vice president has provided the followingestimates:
Expected sales commission $ 8 per unit
Expected annual fixedadministrative costs $ 50,000
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 $65, how many units must Vernonsell to break even?
Vernon estimates that sales will probably be 10,000 units. Whatsales price per unit will allow the company to break even?
Vernon has decided to advertise the product heavily and has setthe sales price at $70. If sales are 12,000 units, how much can thecompany spend on advertising and still break even?

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Total Variable Cost Variable Manufacturing Cost Sales Commission Total Variable Cost 42 per unit 8 per unit Total Variable Cost 50 per unit Total Fixed Cost Fixed Manufacturing Costs Fixed Administrative Costs Total Fixed Cost 70000 See Answer

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In: AccountingVernon Company is considering adding a new product. The costaccountant has provided the following data:...Vernon Company is considering adding a new product. The costaccountant has provided the following data:Expected variable cost ofmanufacturing$42per unitExpected annual fixedmanufacturing costs$70,000The administrative vice president has provided the followingestimates:Expected sales commission$8per unitExpected annual fixedadministrative costs$50,000The 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 $65, how many units must Vernonsell to break even?Vernon estimates that sales will probably be 10,000 units. Whatsales price per unit will allow the company to break even?Vernon has decided to advertise the product heavily and has setthe sales price at $70. If sales are 12,000 units, how much can thecompany spend on advertising and still break even?


Expected variable cost ofmanufacturing	$	42	per unit
Expected annual fixedmanufacturing costs	$	70,000


Expected sales commission	$	8	per unit
Expected annual fixedadministrative costs	$	50,000