Perry Corporation Produces and Sells a Single Product

question 264

Multiple Choice

Perry Corporation produces and sells a single product. Data for that product are: Upper management is considering using a biodegradable packaging which costs $5 more per unit but it produces less waste in the long run. Management plans to increase advertising by $10,000 per month to advertise this new feature to their packaging. They believe that environmentally friendly people will switch to their product resulting in an increase in sales of 2,000 units per month.
What is the effect to the company's breakeven point if these changes are implemented?

• A)They would have to sell 814 fewer units to breakeven.
• B)They would have to sell 660 more units to breakeven.
• C)They would have to sell 2,000 fewer units to breakeven.
• D)They would have to sell 814 more units to breakeven.

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Definitions:

Penetration Rate

The percentage of a target market that has purchased a particular company's product or service over a specific period.

Niche Markets

Segments of a larger market defined by their own unique needs, preferences, or identity, making them distinct from the market at large.

Supply-Side Policies

Economic strategies aimed at increasing production and supply by improving the efficiency and incentives for businesses to produce goods and services.

Federal Reserve System

The central banking system of the United States, responsible for implementing monetary policy and ensuring financial stability.