Flash Point Corporation manufactures a line of computer software. The current selling price is $125.00 per unit based upon current market conditions and is expected to remain constant for the next year. The total variable costs per unit are $75.00, including sales, advertising and all other expenses of operations and planning related to this product. The fixed costs for this product line are determined to be $600,000 per year. The following sales forecasts have been developed by the finance and marketing departments based upon the expected market conditions:
Probability of Sales .2 Low Sales Projection 9000 Units
Probability of Sales .5 Expected Sales Projection 13,000 Units
Probability of Sales .3 High Sales Projection 15,000 Units
What is the projected expected sales in units for this produce line? ____________
What is the projected expected sales in dollars for this product line? $___________
What is the current breakeven point is units for the company? ___________
What is the current sales dollar volume needed to reach the breakeven point? ___________
What is the current expected profit or loss at each of the current sales forecasts?
Low __________Expected_____________High____________
A recent product market price/demand analysis indicates that if prices were reduced to $100 per unit, sales would increase by 3000 units for each probability of sales projection.
What is the new beak even point in units? __________
What is the new dollar sales volume the firm must achieve? ____________
What is the expected profit of loss at each of the new sales forecast?
Low_________Expected____________High____________
Should the Flash Point Corporation reduce the price of this product?Explain you answer.