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Siberian Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 15,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that it can sell between 9,000 pairs and 13,000 pairs of either product this year. Because the models are very similar, Siberian Ski will produce only one of the two models. The following information was compiled by the Accounting Department.
Fixed costs will total $369,600 if the mountaineering model is produced but will be only $316,800 if the touring model is produced. Siberian Ski is subject to a 40% income tax rate. If the Siberian Ski Company Sales Department could guarantee the annual sale of 12,000 pairs of either model, Siberian Ski would A. Produce 12,000 pairs of mountaineering skis because they have a lower breakeven point. B. Produce 12,000 pairs of mountaineering skis because they are more profitable. C. Be indifferent as to which model is sold because each model has the same variable cost per unit. D. Produce 12,000 pairs of touring skis because they have a lower fixed cost. |