1) Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000.

1) Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mary Williams, owner of Williams Products, is evaluating whether to introduce a new product line. After thinking through the production process and the costs of raw materials and new equipment, Williams estimates the variable costs of each unit produced and sold at $6 and the fixed costs per year at $60,000.a. If the selling price is set at $18 each, how many units must be produced and sold for Williams to break even? Use both graphic and algebraic approaches to get your answer.b. Williams forecasts sales of 10,000 units for the first year if the selling price is set at $14 each. What would be the total contribution to profits from this new product during the first year?c. If the selling price is set at $12.50, Williams forecasts that first-year sales would increase to 15,000 units. Which pricing strategy ($14.00 or $12.50) would result in the greater total contribution to profits?d. What other considerations would be crucial to the final decision about making and marketing the new…
Mary Williams, owner of Williams Products, is evaluatingwhether to introduce a new product line. After thinkingthrough the production process and the costs of raw materi-als and new equipment, Williams estimates the variable costsof each unit produced and sold at $6 and the fixed costs peryear at $60,000.a. If the selling price is set at $18 each, how many unitsmust be produced and sold for Williams to break even?Use both graphic and algebraic approaches to get youranswer.b. Williams forecasts sales of 10,000 units for the first year ifthe selling price is set at $14 each. What would be the totalcontribution to profits from this new product during thefirst year?c. If the selling price is set at $12.50, Williams forecasts thatfirst-year sales would increase to 15,000 units. Which pric-ing strategy ($14.00 or $12.50) would result in the greatertotal contribution to profits?d. What other considerations would be crucial to the finaldecision about making and marketing the new product?
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