Question
Federer Ltd manufactures and sells two tennis racquets: Promaster and Grandslam. Annual fixed costs are $4,510,000. The company is subject to a tax rate of
Federer Ltd manufactures and sells two tennis racquets: Promaster and Grandslam. Annual fixed costs are $4,510,000. The company is subject to a tax rate of 30%. Promaster Grandslam Sales mix in units 40% 60% Selling price $210 $260 Variable costs $115 $140 Required: 1) Calculate the weighted average contribution margin, assuming a constant sales mix. 2) Determine the breakeven volume in units and in sales dollars in total and for each product? Assume a constant sales mix. 3) How many units of each product must be sold to earn a target net profit after tax of $770,000? Assume a constant sales mix. 4) Assume the sales mix is changed to 45% and 55%. Will the number of units required to break even be increased or decreased? Explain why.
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