P$4--$ Cost$-$Volume$-$Profit Relationship $(2/7)$

AV Inc. has developed an A$-$Pod and an A$-$Tune which have become popular among young adults. Last

year's cost and operating data for the two audio$-$visual products are presented below:

$\_\_\_\_\_\_$Per Unit$\_\_\_\_\_\_\_$

A$-$Pod A$-$Tune

Selling price...........................$$50$ $$10$

Contribution Margin ratio...........$60\%20\%$

$\_\_\_\_\_\_$Per Year$\_\_\_\_\_\_\_$

Sales volume in units..............$5,00015,000$

Fixed costs.............$$99,000$

Required:

$1.$ Prepare last year's contribution income statement showing both amount and percent

columns for each product and for the company as a whole.

$2.$ Compute the break$-$even point in dollars using the company's weighted average CM ratio.

$3.$ Compute the break$-$even point in units using the weighted average CM$.$ Specify units for each

product.

$4.$ The company has developed a third product and expects to sell $4,000$ units of the new product. It will be sold at $$25$ each, and the variable cost is $$17\mathrm{.}5$ per unit. A market study indicates that the sales of the first two products would not be affected by the new product. Annual fixed costs will remain unchanged. Prepare a contribution income statement for each product and in total.

$5.$ Refer to $(4)$ above. Compute the new break$-$even point in units. Specify units for

each product.