Herzig Industries sells two electrical components with the following characteristics. Fixed costs for the company are $200,000 per year.
| Sales price | $10.00 | $25.00 |
| Variable cost | 6.00 | 17.00 |
| Sales volume | 40,000 units | 60,000 units |
Required:
| a. | How many units of each product must Herzig Industries sell in order to break even? |
| b. | Herzig's vice president of sales has determined that due to market changes, the sales |
price of component XL-709 can be increased to $14.00 with
no impact on sales
volume. What will be Herzig's new break-even point in units?
| c. | Returning to the original information, Herzig's vice president of marketing believes |
that spending $80,000 on a new advertising campaign will increase sales of
component CD-918 to 80,000 units, without affecting the sales of product
XL-709. How many units of each product must Herzig sell to break even under
this new scenario?
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