Reference no: EM132500506

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

                                               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

Fixed costs are $1,000,000 in manufacturing costs and $500,000 in selling, administration, and general costs. The company faces serious competition and and believes it has no room to increase is selling prices.

Required

Question 1. Assuming the existing sales mix, calculate the company's breakeven point in sales dollars and number of units. Your answer should identify the number of Homeowner, OfficeBasic, and OfficeDeluxe units.

Question 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.

Question 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).

The next two questions are independent of each other:

Question 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).

Question 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?