The firm has an existing product with an advertising and promotion budget of $25.0 million, and proj

The firm has an existing product with an advertising and
promotion budget of $25.0 million, and projected sales of 115
million units. They are launching a new product with a budget of
$20.0 million and estimated sales of 10 million units in the first
year. The sales force expense of $10 million has been allocated
equally between the products, with 90% of the plant overhead to the
existing product and 10% to the new product. Additional values for
each product are shown in the table below:

MSRP Volume Discount Unit Cost Promotion Allowance Advertising & Promo. Allocated Fixed Costs Projected Unit Sales Existing P

4. Production anticipates it will need to increase capacity to
140 million units, adding $10.0
million to annual fixed costs. If the product allocation of the
plant cost is also changed to
80%/20%, what is the impact on break-even units?

MSRP Volume Discount Unit Cost Promotion Allowance Advertising & Promo. Allocated Fixed Costs Projected Unit Sales Existing Product $5.39 35% $1.49 15% $25.0 mill. $68.0 mill. 115 million units New Product $4.99 35% $0.99 20% $20.0 mill. $12.0 mill. 10 million units

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