Q3w10

International Printer Machines (IPM) builds three computer printer models: Alpha, Beta, and Gamma. Information for these three products is as follows:

Alpha Beta Gamma Total

Selling price per unit $250 $400 $1 500

Variable cost per unit $80 $200 $800

Expected unit sales (annual) 12,000 6,000 2,000 20,000

Sales mix 50 percent 40 percent 10 percent 100 percent

Total annual fixed costs are $5,000,000. Assume the sales mix remains the same at all levels of sales.

Required:

a) Calculate the weighted average unit contribution margin, assuming a constant sales mix.

b) How many units of each printer must be sold to break even?

c)i) Explain what is margin of safety

ii) Calculate in sales units the margin of safety for IPM, assuming projected sales are

25,000 units?