The data below relates to ABC company. The company has three products.

	Product X	Product Y	Product Z
Selling price per unit	$10	$20	$40
Variable costs per unit	7	12	16

The companys experience has been that about 20 percent of sales comes from Product A, 60 percent from Product B, and the rest from Product C. It has an annual fixed cost of $840,000.

Required:

a) Compute the number of units of each product that would be sold at break even point. ( 4 Marks)

b) Suppose the company expected to sell $2.5 million at the normal mix. Do think it would be better to spend an additional $100,000 on advertisement which would increase the sales of Product C to 30 percent while reducing the mix of product A to 10 percent? Total sales will remain the same. (6 Marks)