2. The landscaping business plans to introduce various aged trees to their product range in 2018. They have provided the following information relating to its planned activities.

I year old 2 years old 3 years old

Sales mix (250,000 units) 125,000 75,000 50,000

Selling price $20 $28 $45

Variable cost/unit 12 18 27

Total fixed cost = $402,800

Required

a. Calculate the break-even point in total units and units per product based on the 2018 data. 15 marks.

b. Calculate the before tax profit (loss) that would be achieved in 2018 based on the above data. This calculation relates to the information from question 2 only. 2 marks.

c. Management is concerned about competition for some of its trees, and wants to increase its sales of 3 years old trees relative to 1 year old trees. This initiative would increase annual fixed costs by $50 000 and alter the sales mix to 30 per cent for 2 years old trees, 30 per cent for 3 years old trees and 40 per cent for 1 year old trees. On the available data, would you recommend the initiative? Show workings. 15 marks.