Multi-product CVP

Awesome Axes sells electric guitars. The company sells three models of guitar: Enthusiast, Jammer and Pro.

Information relating to next years budget for the three models follows:

	Enthusiast	Jammer	Pro
Expected sales (units)	600	350	50
Sales price	$200	$500	$3,000
Variable cost	$120	$200	$800

The company has annual fixed costs of $200,000 and a tax rate of 25%.

Required:

Compute the companys expected profit (net income) for the upcoming fiscal period.

Compute the companys sales mix.

Assuming a consistent sales mix, how many units of each product type must the company sell to break even?

Assuming a consistent sales mix, if the company wishes to earn net income of $300,000, how many units of each product type must be sold?

Compute the margin of safety in both dollar and percentage terms.