Thomlinson Company is considering the development of two products: no. 65 or no. 66. Manufacturing cost information follows. $\begin{array}{lrr}
& \underline{\text { No. } 65} & \underline{\text { No. } 66} \
\text { Annual fixed costs } & \$ 220,000 & \$ 340,000 \
\text { Variable cost per unit } & 33 & 25
\end{array}$
Regardless of which product is introduced, the anticipated selling price will be $50 and the company will pay a 10% sales commission on gross dollar sales. Thomlinson 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

Thomlinson Company is considering the development of two products: no. 65 or no. 66. Manufacturing cost information follows. $\begin{array}{lrr} 
& \underline{\text { No. } 65} & \underline{\text { No. } 66} \
\text { Annual fixed costs } & \$ 220,000 & \$ 340,000 \
\text { Variable cost per unit } & 33 & 25
\end{array}$ 
Regardless of which product is introduced, the anticipated selling price will be $50 and the company will pay a 10% sales commission on gross dollar sales. Thomlinson 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 Thomlinson Company is considering the development of two products: no. 65 or no. 66. Manufacturing cost information follows. $\begin{array}{lrr} 
& \underline{\text { No. } 65} & \underline{\text { No. } 66} \
\text { Annual fixed costs } & \$ 220,000 & \$ 340,000 \
\text { Variable cost per unit } & 33 & 25
\end{array}$ 
Regardless of which product is introduced, the anticipated selling price will be $50 and the company will pay a 10% sales commission on gross dollar sales. Thomlinson 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?

Thomlinson Company Is Considering the Development of Two Products: No