Barram, Inc. buys specialty golf clubs (from India) and resells them to golf courses in the United States. They sell three different types of drivers; the Bear, the Lion, and the Eagle. In the coming year, Barram expects to sell 1,600 units of the Bear, 2,400 units of the Lion, and 4,000 units of the Eagle. All drivers are sold for $100 per driver.

Barram pays the following salaries; $150,000 to the President, $95,000 to the logistics personnel, and $360,000 to their three sales staff. They have the following annual fixed costs: $85,000 in insurance per year, $125,000 in straight-line deprecation of the facility and machinery, $55,000 for utilities, and $25,000 for website maintenance. These fixed costs are applicable across all unit sales (Bear, Lion, and Eagle) They also have the following mixed and variable costs:

A. Shipping costs from India – Upon running a linear regression with annual shipping cost as the dependent Yes variable and units sold as the independent (x) variable, they found an adjusted R2=0.55. The equation of the line had a slope of 4.10, and a y-intercept of 55,000.

B. The cost to purchase drivers from India is 1) $45 for the Bear, 2) $50 for the Lion and 3) $52 for the Eagle.

C. 25% for income tax.

In the space provided below, please answer the following questions in order:

1. What will be Barram's annual after-tax profit in the coming year?

2. If Barram wanted to increase his profitability, but keep total sales in units the same, which type of club should he sell the most of?

2. If Barram INC wants to increase its profitability without changing the sales unit, it must sell more of Bear Club. The reason for the same being, since the fixed cost factor and sales price across all clubs are same, hence the only drivers for profitability is purchase price. Clearly Bear club has lowest purchase price and hence it can generate highest profits.