Company: Pi Automotive Parts

Scenario: Product Costing and Pricing Strategy

• Product Details:
  • Product X:
    • Selling Price per Unit: $180
    • Variable Cost per Unit: $120
    • Fixed Costs: $250,000
• Product Y:
  • Selling Price per Unit: $250
  • Variable Cost per Unit: $150
  • Fixed Costs: $300,000

Requirements:

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

1. Break-Even Analysis:
   • Perform a break-even analysis to determine the number of units and sales revenue needed for Pi Automotive Parts to break even, considering marginal costing insights.

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

1. Pricing Strategy Formulation:
   • Recommend a pricing strategy for each product at Pi Automotive Parts to achieve profitability targets, considering the contribution margin analysis using marginal costing.

1. Cost Management Strategies:

Propose two cost management strategies Pi Automotive Parts could adopt to enhance profitability, based on marginal costing insights.