The product manager for golf balls at Napa Corporation was reviewing price and promotion alternatives f two products: Far and Further. Both products were designed to hit and fly high and long, but Far was a regular bal whereas Further included a special component that helps a distance for the players. Both of the brand managers of and Further are considering two alternatives in order to stimulate sales volume--additional promotion/advertising ($100,000) or a price reduction (10%). A volume, price, and cost summary for the two products follow: Price (per box) Unit variable costs Unit contribution Overhead& Advertising Unit volume Far $10.00 $5.00 $5.00 S100,000 100,000 units Further $12.00 $8.00 $4.00 $200,000 80,000 units
a. What is break-even point in units for Far and Further? In dollars for Far and Further?
b. What absolute increase in unit sales and dollar sales will be necessary to recoup the incremental increase advertising expenditures, which is $100,000, for Far? For Further?
c. What absolute increase in unit sales and dollar sales will be necessary to maintain the original total contribution dollars if the price of each product is reduced by 10 percent?