7-3A-Multi-product CVP Awesome Axes sells electric guitars. The company sells three models of guitar: Enthusiast, Jammer and Pro. Information relating to next year's budget for the three models follows: Expected sales (units) Sales price Variable cost Enthusiast Jammer Pro 600 350 50 $200 $500 $3,000 $120 $200 $800 The company has annual fixed costs of $200,000 and a tax rate of 25%. Required: a.) Compute the company's expected profit (net income) for the upcoming fiscal period. b.) Compute the company's sales mix. c.) Assuming a consistent sales mix, how many units of each product type must the company sell to break even? d.) Assuming a consistent sales mix, if the company wishes to earn net income of $300,000, how many units of each product type must be sold? e.) Compute the margin of safety in both dollar and percentage terms.

7-3A-Multi-product CVP Awesome Axes sells electric guitars. The company sells three models of guitar: Enthusiast, Jammer and Pro. Information relating to next year's budget for the three models follows: Expected sales (units) Sales price Variable cost Enthusiast Jammer Pro 600 350 50 $200 $500 $3,000 $120 $200 $800 The company has annual fixed costs of $200,000 and a tax rate of 25%. Required: a.) Compute the company's expected profit (net income) for the upcoming fiscal period. b.) Compute the company's sales mix. c.) Assuming a consistent sales mix, how many units of each product type must the company sell to break even? d.) Assuming a consistent sales mix, if the company wishes to earn net income of $300,000, how many units of each product type must be sold? e.) Compute the margin of safety in both dollar and percentage terms.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 6CE: Play-Disc makes Frisbee-type plastic discs. Each 12-inch diameter plastic disc has the following...

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7-3A - Multi-product CVPAwesome Axes sells electric guitars. The company sells three models of guitar: Enthusiast, Jammer and Pro.Information relating to next year's budget for the three models follows: EnthusiastJammerProExpected sales (units)60035050Sales price$200$500$3,000Variable cost$120$200$800The company has annual fixed costs of $200,000 and a tax rate of 25%.Required:a.) Compute the company's expected profit (net income) for the upcoming fiscal period.b.) Compute the company's sales mix.c.) Assuming a consistent sales mix, how many units of each product type must the company sell to break even?d.) Assuming a consistent sales mix, if the company wishes to earn net income of $300,000, how many units of each product type must be sold?e.) Compute the margin of safety in both dollar and percentage terms.
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