Company: Epsilon Retail Stores

Scenario: Product Profitability Analysis

Product Performance:

• Product X:
  • Selling Price per Unit: $120
  • Variable Cost per Unit: $80

• Product Y:
  • Selling Price per Unit: $150
  • Variable Cost per Unit: $100

Requirements:

1. Contribution Margin Calculation:
   • Calculate the contribution margin per unit and contribution margin ratio for Product X and Product Y at Epsilon Retail Stores using marginal costing principles.

1. Break-Even Analysis:
   • Perform a break-even analysis to determine the number of units and sales revenue needed for Epsilon Retail Stores to break even, incorporating marginal costing insights.

1. Profitability Comparison:
   • Determine which product (Product X or Product Y) generates higher profitability based on the contribution margin ratio calculated using marginal costing.

1. Strategic Pricing Decision:
   • Recommend a pricing strategy for Epsilon Retail Stores to optimize profitability, considering the contribution margin analysis using marginal costing.

1. Cost Management Strategies:

Propose two strategies Epsilon Retail Stores could implement to manage costs effectively and improve profitability, based on marginal costing insights.