If you decide the cost method the company has chosen is not appropriate, write a recommendation as if you are sending it to the company for real and discuss three (3) reasons to support your recommendation.

 

Suppose your selected company is planning to launch a new product. The target profit for this new product is roughly 1/12 the entire company’s most recently reported annual profit (before taxes).

 

The fixed cost for the new product is estimated to be about 40% of the most recently reported annual cost of goods sold.

 

The contribution margin per unit is smaller by a factor of 20 of the new product’s fixed cost. How many units must be sold for the new product line to break even? You must show ALL your assumptions and calculations.