Reference no: EM132479499

Futurist Enterprises have secured a loan and intend to use some of the proceeds to introduce various aged items to their product range in 2021. They have provided the following information relating to its planned activities.

                        I year old               2 years old                  3 years old

Sales mix            40,000                  40,000                        20,000

Selling price        $12                       $16                               $40

Variable cost/unit  10                        12                                   20

Total fixed cost = $180,300

Management is concerned about competition for some of its products, and wants to alter its sales mix. This initiative would increase annual fixed costs by $25 000 and alter the sales mix to 30 percent for the one year old product, 40 per cent for the two year old product and 30 per cent for the three years old product.

Question 1: On the available data, would you recommend the initiative? Show all workings.