1. For your first assignment, management has provided the following revenue and cost information:

High-End SetEconomical SetSales price$3,500 per unit$1,000 per unit Labor$875 per unit$250 per unit material$1400 per unit$300 per unit

Direct fixed costs$25,000 per month$16,500 per monthAllocated fixed costs$85,000 per month$85,000 per month

They want a better understanding of their business to make budgeting and sales goals decisions and have asked you to determine their:

Contribution Margins for each product line

Break-even quantities for each product line

Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price)

Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales price)

They expect the product lines to fully absorb the costs allocated to them. They have also asked that you show each step in your calculations so that they can understand your analysis. (Note: you will be graded on your intermediary values.)

Once you have determined these amounts, they have asked that you:

present the information

describe how you performed your calculations

and explain what the results mean