Question Details

Economics Homework Help

Question

Minden Company is currently producing and selling 12,000 units (a year) of a new product for $75 per

unit. Minden’s variable costs are $30 per unit and its fixed costs,

at the current level of production

and sales

, are $25 per unit. A recent marketing study suggested that the company can increase its

sales by 4,000 units a year for each $3 reduction in selling price. Minden pays income taxes at a rate

of 40%.

a

.

What is Minden’s net income (loss)

at

the current level of production and sales?

b

.

What is Minden’s current break-even point in both unit sales and dollar sales?

c

.

Assuming that the marketing study is correct, what is the maximum profit that Minden can

earn yearly? How many units would Minden sell and at what price in order to generate this

profit?