7.3 Multiculture Bevco case analysis: Address John and Katherine's questions in a case analysis report.

\fRequired John and Katherine are planning for next year and are considering two things. First, they would like to know how many units of Slava and Zirkova they need to sell next year to reach a target net income of $150,000 (ignore income taxes and duties). They are not sure how to calculate this because most of their xed costs relate to both products. Second, they wonder how they could improve their costing system to help them make better decisions about their products and their company. MBC'S most recent income statement is provided in Exhibit 1. John and Katherine also estimate that 75% of variable manufacturing costs relate to Slava and they expect their current sales mix to stay the same next year. Prepare a report for Iohn and Katherine that addresses their questions. EXHIBIT 1 INCOME STATEMENT MULTICULTUHE BEVCU INCOME Statement Year Ended December 31, 20x2 Sales Cost of goods sold Gross margin Operating expenses Accounting and legal Advertising and promotion Bank charges Commissions Consulting Depreciation Insurance Interest Ofce and general administration Rent Salaries and benets Travel and vehicle Utilities Taxes and duties Total operating expenses Income $390,000 3 12,000 403,000 23,600 ?0,000 3,400 40,000 1 1,000 10,000 9,000 6,000 24,000 43,000 9 5,000 45,000 5,000 3,000 393,000 mas