Psi Manufacturing Co.

Scenario: Cost Behavior and Decision Making

Cost Category	Fixed Cost ($)	Variable Cost per Unit ($)	Activity Level (Units)
Production Costs	200,000	15	30,000
Distribution Costs	100,000	8	40,000

Requirements:

1. Cost Behavior Classification:
   • Classify each cost category (Production Costs and Distribution Costs) as fixed or variable based on the provided data.

1. Total Cost Calculation:
   • Calculate the total cost for Psi Manufacturing Co. at the activity levels of 30,000 units and 40,000 units using marginal costing principles.

1. Contribution Margin Analysis:
   • Compute the contribution margin per unit and contribution margin ratio for Psi Manufacturing Co. based on the provided cost structure.

1. Break-Even Analysis:
   • Perform a break-even analysis to determine the number of units and sales revenue needed for Psi Manufacturing Co. to break even, considering marginal costing insights.

1. Sales Mix and Profitability Analysis:

Conduct a sales mix analysis to determine the optimal product mix that maximizes Psi Manufacturing Co.'s overall contribution margin, applying marginal costing concepts.