PART $1$

Husky Machinery makes three models of its specialized machines for the boat building industry.

Data for the three models for the last fiscal year are as follows:

Additional Fixed Costs are $$5,000,000$ in selling, administration, and general. The company

faces serious competition and believes it has no room to increase its selling prices.

Required

Assuming the existing sales mix, calculate the company's break$-$even point in sales

dollars and number of units. Your answer should identify the number of HM $1,$ HM $2,$ and HM $3$

units. $(3$ pts$)$

Assuming the existing sales mix, calculate the sales revenue required to earn net

income of $$6,000,000$ assuming a $25\%$ income tax rate. $(4$ pts$)$

What impact would doubling the number of HM $2$ units sold next year have on the overall

breakeven point in sales dollars? $($Assume there would be no change in the number of HM $1$ or

HM $3$ units sold, nor would fixed costs change$).(5$ pts$)$

The next two questions are independent of each other:

The company is considering a new advertising campaign that will cost $$4,800,000$ next

year. How many additional units of each product must be sold to justify the new campaign

$($assuming no change in the sales mix$).(3$ pts$)$

Husky Machinery is considering adding a new product $-$ the HM $2+.$ HM $2+$ will sell for

$$250,000$ per unit and have variable costs of $$150,000$ per unit. Additionally, there would be a

$$1,200,000$ increase in total fixed costs. Introducing HM $2+$ will reduce annual sales of HM $2$

and HM $3$ by $10\%$ each but would have no impact on sales of Homeowner. How many units of

HM $2+$ would need to be sold to justify adding it to Husky's product line? $(5$ pts$)$