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Sales price $17.50/unit Equipment cost $250,000 Incremental overhead cost $50,000/year Sales and marketing cost |$150,000/year Operating and maintenance cost $25/operating hour Production time/1,000 units 100 hours Packaging and shipping cost Planning horizon $0.50/unit 5 years Minimum attractive rate of return 15%

Sales price $17.50/unit Equipment cost $250,000 Incremental overhead cost $50,000/year Sales and marketing cost |$150,000/year Operating and maintenance cost $25/operating hour Production time/1,000 units 100 hours Packaging and shipping cost Planning horizon $0.50/unit 5 years Minimum attractive rate of return 15%

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 4BE
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The Gizmo Manufacturing Company is considering making and selling a new product. The following data have been provided to management: Some managers are reluctant to launch a new product because of the uncertainty of future sales. To provide management with information that might make it easier to draw the correct conclusion, a break-even analysis will be performed for annual sales required to economically justify introducing the new product.
What is the break-even value of units sold annually?

Sales price $17.50/unit Equipment cost $250,000 Incremental overhead cost $50,000/year Sales and marketing cost |$150,000/year Operating and maintenance cost $25/operating hour Production time/1,000 units 100 hours Packaging and shipping cost Planning horizon $0.50/unit 5 years Minimum attractive rate of return 15%
Transcribed Image Text:Sales price $17.50/unit Equipment cost $250,000 Incremental overhead cost $50,000/year Sales and marketing cost |$150,000/year Operating and maintenance cost $25/operating hour Production time/1,000 units 100 hours Packaging and shipping cost Planning horizon $0.50/unit 5 years Minimum attractive rate of return 15%
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