Xtra Corporation produces and sells two models of espresso machines, Standard and Deluxe. The company records show the following monthly data relating to these two products:

	Standard			Deluxe
Selling price per unit	$	150		$	165
Variable production costs	$	113		$	128
Variable selling expense per unit	$	23		$	11
Expected monthly sales in units		600			1,200

The company's total monthly fixed cost is $15,000. Tax rate = 35%.

a. What is the break-even in sales dollars?
b. How much (in sales dollars) should Xtra Corporation sell to achieve an after-tax profit of $45,000?
c. If the expected monthly sales in units were divided equally between the two models (900 Standard and 900 Deluxe), would the break-even level of sales be higher, lower or the same as before (in part a)? Why?
d. The Marketing department is of the opinion that the optimal sales mix for the company is 3: 1; that is, the company sells 3 standard units for every deluxe. If so, how many units of Standard and Deluxe should Xtra sell to achieve breakeven?
e. The Marketing department is of the opinion that the optimal sales mix for the company is 3: 1; that is, the company sells 3 standard units for every deluxe. If so, how many units of Standard and Deluxe should Xtra sell to achieve an after-tax profit of $45,000

Answer rating: 100% (QA)

a To calculate the breakeven in sales dollars you can use the following formula Breakeven Sales in dollars Fixed Costs Contribution Margin Ratio First calculate the contribution margin per unit for bo... View the full answer