Albany LTD. manufacturers and sells two (2) different products.

Assume that the sales of Albany LTD for a typical year are as follows:

Product Units Sold Sales Mix

A 18 288 80%

B 4 572 20%

Total 22 860 100%

Assume the following unit selling prices and unit variable cost:

Product Selling Price Variable Cost Contribution Margin

A $89 $74 $15

B $149 $109 40

Fixed costs are $418 000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes.

Required:

1.(5 marks) Determine the breakeven point in total units and, for this breakeven point, calculate the number of A and B that must be sold. Use the weighted-average contribution margin approach.

2.(10 marks) Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution ratio (CMR). (Hint: the weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products). Break down the total sales dollars for product A and sales dollars for product B.

3. (5 marks) Assume the original facts expect that now fixed costs are expected to be $41 800 higher than originally planned. How does this expected increase in fixed costs affect the breakeven point in units? How does the percentage change in the breakeven point compare to the percentage in fixed costs?

4. (5 marks) How does the sales mix impact both breakeven and profitability?