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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text: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.
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