Homework Answers
Answer- If the company shifts its product mix to 3000 standard units and 4500 deluxe units, profit before tax will = Increase by $10000 (ie - $77000-$67000).
Explanation- Profit before tax (with new product mix) = Total contribution margin – Total fixed costs
= ($36000+$99000)-($24000+$18000+$16000)
= $135000-$58000
= $77000
Contribution margin at change product mix- Standard = ($48000/4000 units)*3000 units
= $36000
Contribution margin at change product mix- Deluxe = ($77000/3500 units)*4500 units
= $99000
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