The Sales Manager of Springdale Enterprises Is Considering Expanding Sales

question 43

Essay

The sales manager of Springdale Enterprises is considering expanding sales by producing three different versions of its product. Each will be targeted by the marketing department to different income levels and will be produced from three different qualities of materials. After reviewing the sales forecasts, the sales department feels that 40% of units sold will be the original product, 35% will be new model #1 and the remainder will be new model #2.
The following information has been assembled by the sales department and the production department.
$$\begin{array} { l r r r } & \text { Original } & \text { Model \#1 } & \text { Model \#2 } \\\text { Sales price (per unit) } & \$ 100.00 & \$ 70.00 & \$ 50.00 \\\text { Material cost } & 45.00 & 30.00 & 20.00 \\\text { Direct labor } & 20.00 & 15.00 & 10.00 \\\text { Variable overhead } & 15.00 & 11.25 & 7.50\end{array}$$
The fixed costs associated with the manufacture of these three products are $175,000 per year.
Required:
Determine the number of units of each product that would be sold at the break-even point.

---

Definitions:

Cash Dividend

A payment made by a company out of its earnings to its shareholders, typically in the form of cash.

Retained Earnings

Retained earnings are the portion of a company's net income that is kept within the company instead of being paid out to shareholders as dividends, used for reinvestment.

Prerequisites

Requirements that must be met or completed before taking on a subsequent task or enrolling in a particular course or program.

Declaration Date

The specific date on which a company announces the payment of a dividend, detailing the amount to be paid and to whom it will be distributed.