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Compute what is maximum profit that company can earn yearly

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Reference no: EM132587004

Oregon Holdings AG of Zurich, Switzerland, has just introduced a new fashion watch for which the company is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each SFr90 per unit reduction in the selling price. (SFr2 denotes 2 Swiss francs.) The company's present selling price is SFr90 per unit, and variable expenses are SFr60 per unit. Fixed expenses are SFr840, 000 per year. The present annual sales volume (at SFr90 selling price) is 25,000 units. Instructions

Question 1. What is the present yearly net operating income or loss?

Question 2. What is the present break-even point in units and in Swiss franc sales?

Question 3. Assuming that the marketing studies are correct, what is the maximum profit that the company can earn yearly? At how many units and at what selling price per unit would the company generate this profit?

Reference no: EM132587004

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