ABC company produces three types of engines for vehicles: Standard, Extra and Deluxe. The following table provides information about expected price and variable costs

Standard Extra Deluxe

Unit sales 50,000 50,000 100,000

Unit selling price $28 $36 $48

Manufacturing VC per unit $13 $ 12 $25

Administrative VC per unit $5 $4 $6

Budgeted level of manufacturing FC is USD 2,000,000 and administrative FC is USD 600,000.

1. Calculate expected operating income
2. Assuming budgeted sales mix, calculated BEP for every product
3. Now the company estimated costs and prices, and found out that VC for Deluxe engine should be by
4. 20% that initial level, and administrative VC of Extra products should be USD 1 higher than previously. The company is not going to increase the prices, but decided to increase sales of Deluxe products in the sales mix, making them 60% of total sales. The level of total sales will not change Re- calculate BEP.