Cambridge Manufacturing Is Evaluating the Introduction of a New Product

question 113

Essay

Cambridge Manufacturing is evaluating the introduction of a new product that would have a unit selling price of $100. The total annual fixed costs are estimated to be $200,000 and the unit variable costs are projected at $60. Forecast sales volume for the first year is 8,000 units.
a) What sales volume (in units) is required to break even?
b) What volume is required to generate a net income of $100,000?
c) What would be the net income at the forecast sales volume?
d) At the forecast sales volume, what will be the change in the net income if fixed costs are: (i) 5% higher than expected? (ii) 10% lower than expected?
e) At the forecast sales volume, what will be the change in the net income if unit variable costs are: (i) 10% higher than expected? (ii) 5% lower than expected?
f) At the forecast sales volume, what will be the change in the net income if the unit selling price is: (i) 5% higher? (ii) 10% lower?
g) At the forecast sales volume, what will be the change in the net income if unit variable costs are 10% higher than expected and fixed costs are simultaneously 10% lower than expected?

Comprehend the importance of studying scholarly theories and systematic research in developing effective PR campaigns.

Understand the inoculation theory and its relevance in PR.

Differentiate between quantitative and qualitative research methods in the context of PR.

Understand the significance of cash flow from different activities (operating, investing, financing) for the sustainability of a firm.

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Definitions:

Retail

The sale of goods and services directly to consumers for personal use, conducted through various channels like stores, online platforms, or direct sales.

Scrambled Merchandising

Selling goods and services that may be unrelated to each other and to the firm’s original business.

Corporate Chain

A series of businesses or retail outlets owned and operated by a single company.

Franchise Arrangement

A type of licensing arrangement where a franchisor allows a franchisee to use its business model and brand for a prescribed period.