Water World sells three products: ski vests, slalom skis, and ski ropes. Information related to each product line is provided below:
| Ski Vests | Slalom Skis | Ski Ropes |
Unit selling price | $120 | $300 | $50 |
Unit variable cost | 60 | 210 | 10 |
Sales mix percentage | 20% | 70% | 10% |
The company’s annual fixed costs are approximately $741,000.
a. Compute total annual sales that the company must generate to break even.
b. Compute total annual sales that the company must generate to earn operating income of $234,000.
c. As Water World’s marketing manager, what marketing strategy would you pursue to help the company maximize its profit potential?
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