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:
Enthusiast
Jammer
Pro
Expected sales (units)
600
350
50
Sales price
$200
$500
$3,000
Variable cost
$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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