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Delta Retail Solutions Scenario: Multi-Product Profitability Analysis Product Details: Product A: Selling Price per Unit: $150 Variable Cost per Unit: $100 Fixed Costs: $120,000 Product
Delta Retail Solutions
Scenario: Multi-Product Profitability Analysis
Product Details:
- Product A:
- Selling Price per Unit: $150
- Variable Cost per Unit: $100
- Fixed Costs: $120,000
- Product B:
- Selling Price per Unit: $200
- Variable Cost per Unit: $120
- Fixed Costs: $180,000
Requirements:
- Contribution Margin and Profitability Analysis:
- Calculate the contribution margin per unit and contribution margin ratio for Product A and Product B at Delta Retail Solutions. Analyze which product is more profitable and explain why.
- Break-Even and Sensitivity Analysis:
- Perform a break-even analysis considering the sales mix of Product A and Product B. Conduct a sensitivity analysis to assess how changes in variable costs would impact the break-even point.
- Optimal Sales Mix:
- Determine the optimal sales mix that maximizes Delta Retail Solutions' overall contribution margin. Justify your recommendation with a quantitative analysis of different sales scenarios.
- Strategic Decision Making:
- The company is considering discontinuing Product B due to declining profitability. Using marginal costing insights, advise whether this decision is justified and suggest alternative strategies.
- Cost Management Strategies:
- Propose two cost management strategies that Delta Retail Solutions could implement to reduce variable costs without compromising product quality or customer satisfaction.
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