Stella Company sells only two products, Product A and Product B. 8 Total $50.00

Question

Stella Company sells only two products, Product A and Product B. 8 Total $50.00 Product A Product B Selling price Variable cost per unit Total fixed costs $40.00 $28.00 $2.00 $1,361,000 Stella sells two units of Product A for each unit it sells of Product B. Stella faces a tax rate of 40%. Stella desires a net after-tax income of $69,000 How many units of Product A and Product B are needed to earn net after-tax income of $69,000? O A. 17,306 units of Product A and 34,612 units of Product B ( B. 41,000 units of Product A and 20,500 units of Product B ° C. 34,612 units of Product A and 17,306 units of Product B D. 20,500 units of Product A and 41,000 units of product B

Explanation / Answer

Income before tax = 69000*100/60 = 115000

Weight = 2:1

Weighted average contribution margin per unit = (12*2/3+48*1/3) = 24 per unit

Break even point = (1361000+115000)/24 = 61500 Units

Product A = 61500*2/3 =41000 Units

Product B = 61500*1/3 = 20500 Units

So answer is b) 41000 units of product A and 20500 units of product B

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