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# Q5 A company has developed a new product for which there is currently no competition.

**Q5 A company has developed a new product for which there is currently no **

** competition. The company has spent $500,000 to develop the product, and has **

** the following details to produce and sell the product:**

** Per Unit:**

** Manufacturing Costs: Selling & Admin:**

** VC $5.00 $2.00 **

** FC 8.00 1.50**

** The minimum required rate of return (MRROR) 10%**

**The company expects to produce and sell 100,000 units of the product in the first year.**

**Require: 1. Determine the minimum selling price based on the above information**

**2. Show the sales and profitability if the company sells all the units produced**

**3. What would be the profit or loss if the company sold only 60% of the production**

**4. Comment on the risks in this approach.**

**[10 marks/12minutes] **