Question

The sales manager of Trisha’s Global Marketing (TGM) is considering expanding sales by taking their Original Widget and modifying it for export into the European and Asian markets. Relatively minor cosmetic changes will be made to enhance appeal to local tastes. After reviewing the sales forecasts, the sales department feels that 50% of units sold will be the Original product, 30% will be new Euro and the remainder will be the new Pacific.

The information in the table has been assembled by the sales and production departments. The common fixed costs associated with the manufacture of these three products are $1,920,000 per year and TGM has a marginal tax rate of 25%.

	Original	Euro	Pacific
Sales Price (per unit)	$65.00	$75.00	$70.00
Material cost (per unit)	$26.00	$28.00	$23.00
Direct labor (per unit)	$13.00	$14.00	$15.00
Variable OH (per unit)	$17.00	$16.00	$16.00

How many total units must TGM sell to earn $500,000 before taxes? Round to the nearest unit.

Answer 1

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