Reference no: EM132911003

ABC manufactures and sells car tyres. It has developed two new models, 'A' and 'Z'. The annual fixed cost is $180000. From a pre-launch market survey, it expects that sixty percent of the potential customers prefer 'A' while forty percent prefer ''Z'.

The following information has been extracted:
                                                   A                              Z
Selling Price per tyre                    $150                    $200
Variable Cost per tyre                   $50                         $75

Required:

Problem 1: Calculate the break-even point in units and in sales dollars (in total and per product) for ABC. Assume a constant sales mix.

Problem 2: How many tyres of each model need to be sold to earn a target net profit of $400,000? Assume a constant sales mix.

Problem 3: Identify any two factors that must be assumed to enable CVP analysis to be conducted.