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ABC manufactures and sells calculators. It has developed two new models, 'Pro' and 'Stu'. The annual fixed cost is $18,000. From a pre-launch market survey,
ABC manufactures and sells calculators. It has developed two new models, 'Pro' and 'Stu'. The annual fixed cost is $18,000. From a pre-launch market survey, it expects that sixty percent of the potential customers prefer 'Stu' while forty percent prefer "Pro". The following information has been extracted: Pro Stu Selling Price per calculator $15 $20 Variable Cost per calculator $5 $8 Required: (a) Calculate the break-even point in units and in sales dollars (in total and per product) for ABC. Assume a constant sales mix. (4 marks) (b) How many calculators of each model need to be sold to earn a target net profit of $40,000? Assume a constant sales mix. (4 marks) (c) Identify any two factors that must be assumed to enable CVP analysis to be conducted. (2 marks)
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