Anthony Herrera, president of Retro Recreation Products, Inc., is concerned about declines that he is beginning to

Question:

Anthony Herrera, president of Retro Recreation Products, Inc., is concerned about declines that he is beginning to see in the demand for the company's line of old school logo basketballs as new competitors enter the market. At a current of $8, the company must sell 81,250 basketballs to generate the desired $200,000 in annual operating income. Based on a recent market research report, Anthony thinks the company can expect annual sales of only 65,000 basketballs in the future.

Required
a. What is Anthony's current level of fixed expenses?
b. What is Anthony's current breakeven point?
c. If Anthony wants to maintain the current level of operating income in the future while selling only 65,000 basketballs, what must the basketballs generate?
d. What action(s) could Anthony take to achieve this new ?
e. If Anthony wants to earn $175,000 in annual net income, how many basketballs must he sell? Assume a 30% tax rate.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...