Company: Sigma Pharmaceuticals

Scenario: Product Costing and Pricing Strategy

• Product Details:
  • Product X:
    • Selling Price per Unit: $100
    • Variable Cost per Unit: $60
    • Fixed Costs: $200,000
• Product Y:
  • Selling Price per Unit: $150
  • Variable Cost per Unit: $80
  • Fixed Costs: $250,000

Requirements:

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

1. Break-Even Analysis:
   • Perform a break-even analysis to determine the number of units and sales revenue needed for Sigma Pharmaceuticals 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 Sigma Pharmaceuticals to achieve profitability targets, considering the contribution margin analysis using marginal costing.

1. Cost Management Strategies:
   • Propose two cost management strategies Sigma Pharmaceuticals could adopt to enhance profitability, based on marginal costing insights.