Question
A company sells only two products, Product A and Product B, and has the following cost information: Selling price per unit Product A $4 Selling
A company sells only two products, Product A and Product B, and has the following cost information:
Selling price per unit Product A $4
Selling price per unit Product B $5
Variable cost per unit Product A $2
Variable cost per unit Product B $3
Total fixed costs $840
The company sells two units of Product A for each unit it sells of Product B. The company faces an income tax rate of 30%.
A) What is the breakeven point in units for each product assuming the sales mix is 2 units of Product A for each unit of Product B?
B) What is the breakeven point if the company's income tax rate is reduced to 25%, assuming the sales mix is 2 units of Product A for each unit of Product B?
C) How many units of each product would be sold if the company desired an after-tax net income of $525, facing an income tax rate of 30%?
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