Husky Coffee makes three single cup coffee brewing machines for home and office that use specially packaged portions of coffee, tea, and hot chocolate that can be purchased on-line from Husky Coffee or through specialty coffee shops.

	Homeowner	OfficeBasic	OfficeDeluxe
Sales Volume (units)	12,000	30,000	6,000
Unit Selling Price	$ 150	$ 200	$ 300
Variable Cost per unit	120	140	180
Contribution Margin per unit	$ 30	$ 60	$ 120

Data for the three models for the last fiscal year are as follows:

Fixed costs are $10,000,000 in manufacturing costs and $5,000,000 in selling, administration, and general costs. The company faces serious competition and believes it has no room to increase is selling prices.

Required

1. Assuming the existing sales mix, calculate the company's break even point in sales dollars and number of units. Your answer should identify the number of Homeowner, OfficeBasic, and OfficeDeluxe units. (4 pts)
2. Assuming the existing sales mix, calculate the sales revenue required to earn net income of $1,125,000 assuming a 25% income tax rate. (4 pts)
3. What impact would doubling the number of OfficeBasic units sold next year have on the overall breakeven point in sales dollars? (Assume there would be no change in the number of Homeowner or OfficeDeluxe units sold, nor would fixed costs change). (5 pts)

The next two questions are independent of each other:

4) The company is considering a new advertising campaign that will cost $180,000 next year. How many addition units of each product must be sold to justify the new campaign (assuming no change in the sales mix). (5 pts)

5) Husky Coffee is considering adding a new product - the OfficePlus. OfficePlus will sell for $250 per unit and have variable costs of $160 per unit. Additionally, there would be a $102,000 increase in fixed costs. Introducing OfficePlus will reduce annual sales of OfficeBasic and OfficeDeluxe by 10% each but would have no impact on sales of Homeowner. How many units of OfficePlus would need to be sold to justify adding it to Husky's product line? (7 pts)

Answer rating: 100% (QA)

1 BreakEven Point Contribution margin ratio for each product Homeowner 30 150 02 OfficeBasic 60 200 ... View the full answer