Extensions of the CVP Model—Multiple Products
On the Go, Inc., produces two models of traveling cases for laptop computers: the Programmer and the Executive. The bags have the following characteristics:
|
Programmer |
Executive |
|
|
Selling price per bag |
$70 |
$100 |
|
Variable cost per bag |
$30 |
$40 |
|
Expected sales (bags) per year |
8,000 |
12,000 |
The total fixed costs per year for the company are $819,000.
Required
a. What is the anticipated level of profits for the expected sales volumes?
b. Assuming that the product mix is the same at the break even point, compute the break even point.
c. If the product sales mix were to change to nine Programmer style bags for each Executive style bag, what would be the new break even volume for On the Go?