Thompson Company is considering the development of two products: Product No. 65 or Product No. 66. Manufacturing cost information follows. $\begin{array} { | l | c | c | }
\hline & \text { No. } 65 & \text { No. } 66 \
\hline \text { Annual lixed costs } & \$ 220,000 & \$ 340,000 \
\hline \text { Variable cost per unit } & 33 & 25 \
\hline
\end{array}$ Regardless of which product is introduced, the anticipated selling price will be $50 and Thompson will pay a 10% sales commission on gross dollar sales. Thompson will not carry an inventory of these items.
Required:
A. What is the break-even sales volume (in dollars) on product no. 66?
B. Which of the two products will be more profitable at a sales level of 25,000 units?
C. At what unit-volume level will the profit/loss on Product No. 65 equal the profit/loss on Product No. 66?

Question

Thompson Company is considering the development of two products: Product No. 65 or Product No. 66. Manufacturing cost information follows. $\begin{array} { | l | c | c | } 
\hline & \text { No. } 65 & \text { No. } 66 \
\hline \text { Annual lixed costs } & \$ 220,000 & \$ 340,000 \
\hline \text { Variable cost per unit } & 33 & 25 \
\hline
\end{array}$ Regardless of which product is introduced, the anticipated selling price will be $50 and Thompson will pay a 10% sales commission on gross dollar sales. Thompson will not carry an inventory of these items.
Required:
A. What is the break-even sales volume (in dollars) on product no. 66?
B. Which of the two products will be more profitable at a sales level of 25,000 units?
C. At what unit-volume level will the profit/loss on Product No. 65 equal the profit/loss on Product No. 66?

Quizplus · Accepted Answer

The Answer of Thompson Company is considering the development of two products: Product No. 65 or Product No. 66. Manufacturing cost information follows. $\begin{array} { | l | c | c | } 
\hline & \text { No. } 65 & \text { No. } 66 \
\hline \text { Annual lixed costs } & \$ 220,000 & \$ 340,000 \
\hline \text { Variable cost per unit } & 33 & 25 \
\hline
\end{array}$ Regardless of which product is introduced, the anticipated selling price will be $50 and Thompson will pay a 10% sales commission on gross dollar sales. Thompson will not carry an inventory of these items.
Required:
A. What is the break-even sales volume (in dollars) on product no. 66?
B. Which of the two products will be more profitable at a sales level of 25,000 units?
C. At what unit-volume level will the profit/loss on Product No. 65 equal the profit/loss on Product No. 66?

Thompson Company Is Considering the Development of Two Products: Product