Question
Waterfront Inc sells product AB for $250. Product AB cost Waterfront $100 wholesale and they pay 5% sales commission to the sales staff for each
Waterfront Inc sells product AB for $250. Product AB cost Waterfront $100 wholesale and they pay 5% sales commission to the sales staff for each Product AB sold. Total monthly fixed costs consist of $11,000 in fixed overhead and $2,750 in fixed selling and administrative costs. Required: A) Compute the break-even point in units B) How many units must be sold to earn an after tax profit of $11,550 (tax rate 40%)? C) What would be the break-even point in units if the sales commission is eliminated and replaced with a flat salary of $11,000 per month? D) Suppose Waterfront sells GH and AB. The GH sells for $125 and cost $50 wholesale. The AB sells for $250 and cost $100 wholesale. Fixed costs for Waterfront are $28,350. The sales mix is 80% AB and 20% GH (4 AB to every 1 GH). How many AB and GH must they sell to break-even (ignore the sales commission mentioned in the original scenario).
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