Olive Plantations Pty Ltd currently produces two products: candle and soap. It plans to introduce detergents to their product range in 2022. The following information is related to its planned activities:

Candles Soaps Detergents

Sales mix (250,000 units) 75,000 50,000 125,000

Selling price $28 $45 $20

Variable cost/unit $18 $27 $12

Total fixed costs = $402,800

Required:

(a) Calculate the break-even point in total units and units per product based on the 2022 data. (6 marks)

(b) Calculate the profit/loss (before tax) that would be achieved in 2022 based on the above data. (2 marks)

(c) Management is concerned about increasing competition for some of its products, and wants to increase its sales of Soaps relative to Detergents. The initiative would increase annual fixed costs by $50,000 and alter the sales mix to 30 per cent for Candles, 30 per cent for Soaps and 40 per cent for Detergents. Assume the total units sold are held constant at 250,000 units, based on the available data, would you recommend the initiative? Show evidence to support your recommendation.