Question:
(CVP, multiproduct) Winnie Wholesalers sells baseball products. The Little League Division handles both bats and gloves. Historically, the firm has averaged three bats sold for each glove sold. Each bat has a $4 contribution margin and each glove has a $5 contribution margin.
The fixed costs of operating the Little League Division are $200,000 per year. Each bat sells for $10 on average and each glove sells for $15 on average. The corporate wide tax rate for the company is 40 percent.
a. How much revenue is needed to break even? How many bats and gloves would this represent?
b. How much revenue is needed to earn a pretax profit of $90,000?
c. How much revenue is needed to earn an after-tax profit of $90,000?
d. If the Little League Division earns the revenue determined in part (b), but in doing so sells two bats for each glove, what would the pretax profit (or loss) be? Why is this amount not $90,000?