Problem I

Alaska Ski Company recently expanded its manufacturing capacity to allow it to produce up to 15,000 pairs of cross-country skis of either the mountaineering model or the touring model.The sales department assures management that it can sell between 9,000 and 13,000 pairs (units) of either product this year.Because the models are very similar, Alaska Ski will produce only one of the two models.The following data were compiled by the accounting department.

Mountaineering Touring

Selling price per unit P 88.00 80.00

Variable cost per unit 52.80 2.80

Fixed costs will total P 369,600 if the mountaineering model is produced but will be only P 316,800 if the touring model is produced.Alaska Ski Company is subject to a 40% income tax rate.

1.If Alaska Ski Company desires an after-tax net income of P 24,000, how many pairs of touring model skis will the company have to sell?

2.The total sales revenue at which Alaska Ski Company would make the same profit or loss regardless of the ski model it decided to produce is

3.How much would the variable cost per unit of the touring model have to change before it had the same breakeven point in units as the mountaineering model?

4.If the variable cost per unit of touring skis decreases by 10%, and the total fixed cost of touring skis increases by 10%, the new breakeven point will be

5.If the Alaska Ski Company sales department could guarantee the annual sale of 12,000 skis of either model, what model would Alaska produce to be more profitable?