1) Mount Carmel Company operates out of a facility located in Sault Ste. Marie, Ontario. The 10-year-old...
Question:
1) Mount Carmel Company operates out of a facility located in Sault Ste. Marie, Ontario. The 10-year-old company sells only two products, Product A and Product B.
Product A | Product B | Total | |
Selling price | $40 | $50 | |
Variable cost per unit | $24 | $40 | |
Total fixed costs | $840,000 |
Product A is a more popular item with the customers. Mount Carmel sells two units of Product A for each unit it sells of Product B. The company faces a tax rate of 30%.
Complete the following:
a. What is the breakeven point in units for each product assuming the sales mix is 2 units of Product A for each unit of Product B?
b. What is the breakeven point if Mount Carmel's tax rate is reduced to 25%, assuming the sales mix is 2 units of Product A for each unit of Product B?
c. How many units of each product would be sold if Mount Carmel desired an after-tax net income of $73,500, facing a tax rate of 30%?
Industrial Organization Markets and Strategies
ISBN: 978-1107069978
2nd edition
Authors: Paul Belleflamme, Martin Peitz