CVP Analysis of Alternative Products Assume Converse, a Nike company, plans to expand its manufacturing capacity...

Transcribed Image Text:

CVP Analysis of Alternative Products Assume Converse, a Nike company, plans to expand its manufacturing capacity to allow up to 48,000 pairs of a new shoe product each year. Because only one product can be produced, management is deciding between the production of the Roadrunner for backpacking and the Trail Runner for exercising. A marketing analysis indicate Converse could sell between 19,200 and 32,000 pairs of either product. The accounting department has developed the following price and cost information: Product Trail Selling price per pair Variable costs per pair Fixed production costs Roadrunner Runner $140 80 $125 75 $240,000 $160,000 Additional annual facility costs, regardless of product, are estimated at $160,000. Assume Converse is subject to a 20% income tax rate. Required a. Determine the number of pairs of each product that Converse must sell to obtain an after-tax profit of $80,000. Note: Round your answer up to the nearest whole unit (for example, round 41.2 to 42). pairs Roadrunner: 0 Trail Runner: 0 pairs b. Determine the number of pairs of each product Converse must sell to obtain identical before-tax profit. Note: Round your answer up to the nearest whole unit (for example, round 41.2 to 42). 0 pairs of each type c. For the solution to requirement (b), calculate Converse's after-tax profit or loss. Roadrunner: $ 0 Trail Runner: $ 0 d. Which product should Converse produce if both products were guaranteed to sell at least 28,800 pairs? e. How much would the variable costs per pair of the product not selected in requirement (d) have to fall before both products provide the same profit at sales of 28,800 pairs? $ 0 CVP Analysis of Alternative Products Assume Converse, a Nike company, plans to expand its manufacturing capacity to allow up to 48,000 pairs of a new shoe product each year. Because only one product can be produced, management is deciding between the production of the Roadrunner for backpacking and the Trail Runner for exercising. A marketing analysis indicate Converse could sell between 19,200 and 32,000 pairs of either product. The accounting department has developed the following price and cost information: Product Trail Selling price per pair Variable costs per pair Fixed production costs Roadrunner Runner $140 80 $125 75 $240,000 $160,000 Additional annual facility costs, regardless of product, are estimated at $160,000. Assume Converse is subject to a 20% income tax rate. Required a. Determine the number of pairs of each product that Converse must sell to obtain an after-tax profit of $80,000. Note: Round your answer up to the nearest whole unit (for example, round 41.2 to 42). pairs Roadrunner: 0 Trail Runner: 0 pairs b. Determine the number of pairs of each product Converse must sell to obtain identical before-tax profit. Note: Round your answer up to the nearest whole unit (for example, round 41.2 to 42). 0 pairs of each type c. For the solution to requirement (b), calculate Converse's after-tax profit or loss. Roadrunner: $ 0 Trail Runner: $ 0 d. Which product should Converse produce if both products were guaranteed to sell at least 28,800 pairs? e. How much would the variable costs per pair of the product not selected in requirement (d) have to fall before both products provide the same profit at sales of 28,800 pairs? $ 0