Marlboro Company makes three products, Alpha, Beta, Gamma.

Below are the income statements for two recent months:

Fixed Costs are: $56,000

May June

Sales $160,000 $120,000

Costs 120,000 104,000

Net Income 40,000 16,000

Selling price and cost data by product are as follows.

Alpha Beta Gamma

Selling Price $40 $20 $10

Variable Costs 16 6 6

Contribution Margin 24 14 4

Sales mix (in dollars) 40% 40% 20%

1.) Determine the break-even point in dollars

2.) Which product is the most profitable per unit sold?

3.) Which product is most profitable per dollar of sales?

4.) What sales dollars are needed to earn $70,000 per month, and how many units of each product will be sold at that sales level if the usual mix is maintained?

5.) The sales manager belives that he could increase sales of Gamma by 10,000 units per month if more attention were devoted to is and less to Beta. Sales of Beta would fall by 2,000 units per month. What change in income would occur if this action were taken?

6.) July sales were $200,000 with a mix of 40% Alpha, 30% Beta and 30% Gamma. What was the income?

7.) Suppose the company is currently selling 12,000 units of Gamma. Because this is the least profitable product, management believes it should be dropped from the mix. If Gamma is dropped, it is expected that sales of Beta would remain the same and those of Alpha would rise. By how much would sales of Alpha have to rise to maintain the same total income?