Iota Manufacturing Inc.

Scenario: Production Cost Analysis

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 using marginal costing principles.
2. Break-Even Analysis:
   • Perform a break-even analysis to determine the number of units and sales revenue needed for Iota Manufacturing Inc. to break even, considering marginal costing insights.
3. Profitability Analysis:
   • Determine which product (Product X or Product Y) generates higher profitability based on the contribution margin ratio calculated using marginal costing.
4. Sales Mix Analysis:
   • Conduct a sales mix analysis to identify the optimal sales mix that maximizes Iota Manufacturing Inc.'s overall contribution margin, using marginal costing concepts.
5. Strategic Pricing Decision:
   • Recommend a pricing strategy for Iota Manufacturing Inc. to achieve its profit target, considering the contribution margin analysis using marginal costing.