Coconut Plantations Pty Ltd management plans to
introduce detergents to their product range in 2019. They have provided the following information relating to their planned activities.
Candles Soaps Detergents
Sales mix (250 000 units) 75 000 50 000 125 000
Selling price $28 $45 $20
Variable cost/unit 18 27 12
Total fixed costs = $402 800
1. Calculate the break-even point in total units and units per product based on the 2019 data.
2. Calculate the before tax profit (loss) that would be achieved in 2019 based on the above data.
3. Management is concerned about increasing competition for some of its products and wants to increase its sales of Soaps relative to Detergents. The initiative would increase annual fixed costs by $50 000 and alter the sales mix to 30 per cent for Candles, 30 per cent for Soaps and 40 per cent for Detergents. On the available data, would you recommend the initiative?