Question

Mountain Maples is a mail-order nursery dedicated to growing, selling, and shipping beautiful Japanese Maple trees. Located on a ridge-top in Mendocino County, northern California, Mountain Maples offers two distinctive types of Japanese Maples: Butterfly and Moonfire. The trees are sold after five growing seasons, and revenue and cost data for each tree type (for the most recent year) are as follows:

	Units sold	Selling Price per Unit	Variable cost per Unit
Butterfly	600	$300	$  150
Moonfire	400	400	300

Mountain Maples' fixed costs for the most recent year were $78,000.

Required:

1. How many Japanese Maples must Mountain Maples sell in a year to break even? At this sales volume, how many Butterfly and Moonfire trees are sold?

2. At the current product mix, how many Butterfly trees must Mountain Maples sell in a year to earn an after-tax profit of $23,400, assuming that tax rate is 40%?

Answer 1