- Problem 2 Master Budget Pricey Waters Is A Company In Indonesia Engaged In Selling Artisan Teas Due To High Demand F 1 (159.9 KiB) Viewed 28 times
Problem 2 - Master Budget Pricey Waters is a company in Indonesia engaged in selling artisan teas. Due to high demand, for every one Chamomile Tea sold, three Lavender Teas are sold. Below is the information about the price, variable cost, and fixed cost of each drink: Product Selling price Variable cost Fixed cost Chamomile Tea $3,4 $2,6 $34.000 Lavender Tea $1,6 $1,3 Required: 1. How many Chamomile Tea and Lavender Tea that must be sold so that Pricey Waters can break-even? How much is the break-even revenue for Pricey Waters? 2. If Pri Waters wants an operating income of $ 136.000, how much Chamomile Tea and Lavender Tea must be sold? What is the margin of safety? 3. If Pricey Waters wants a net income of $ 136.000, how many Chamomile Tea and Lavender Tea must be sold? What is the margin of safety? (Assuming a 20% tax rate) 4. Pricey Waters is considering automating the production process. If a machine replaces the process, there will be an additional fixed cost of $83.500, but the variable cost for each drink drops by 10%. With the given previous sales mix, how many Chamomile Tea and Lavender Tea must be sold so that Pricey Waters can break-even? How much is the break-even revenue? 5. Another option that is being considered by Pricey Waters is opening a new store. The addition of this new store will increase the fixed cost by $54.000 and change the sales mix so that every one Chamomile Tea sold, one Lavender Tea will be sold as well. How many Chamomile Tea and Lavender Tea does Pricey Waters have to sell to break-even? How much is the break-even revenue?