Company: Zeta Pharmaceuticals

Scenario: Product Costing and Pricing Strategy

Product Details:

• Product A:
  • Selling Price per Unit: $80
  • Variable Cost per Unit: $50

• Product B:
  • Selling Price per Unit: $100
  • Variable Cost per Unit: $60

Requirements:

1. Contribution Margin Calculation:
   • Calculate the contribution margin per unit and contribution margin ratio for Product A and Product B at Zeta 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 Zeta Pharmaceuticals to break even, considering marginal costing insights.

1. Profitability Analysis:
   • Determine which product (Product A or Product B) 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 Zeta Pharmaceuticals to achieve profitability targets, considering the contribution margin analysis using marginal costing.

1. Cost Management Strategies:
   • Recommend two strategies Zeta Pharmaceuticals could adopt to manage costs effectively and improve profitability, based on marginal costing insights.