The Forever2 Company make two products, A and B. The details on sales mix and costs and revenue appear below:

The Sales Mix is 1 unit of A and 4 units of B.

The income statement for the current sales volume is below:

Required:

1. Determine the breakeven point in units and revenue.
2. Create a Cost Volume Profit chart.
3. If the sales mix changes so the 2 units of A are sold for every 3 units of B, how will the answers to parts a and b change?
4. Consider part c. What is the name of the type of analysis used in part c? What CVP issues does this method address? How else could it be used and how would decisions be improved?

Product A Product B Total Cost/Quantity $140 10,000 5 $7.50 2 $25 $80 40,000 3 $5.00 1 $25 $1,500,000 regular rate only Sales Price Sales Volume Direct Material/unit Direct material cost/lb. Direct labor hours/unit Direct labor rate/hour Manufacturing Supplies Machine hours/unit Overtime Hours Overtime Rate Premium Plant Utilities/mh Depreciation Plant Supervisory Salaries Plant Manager's Salary President's Salary Design Engineer Salaries Factory Janitorial Salaries Fixed Selling & Admin. Sales Commission % Sales Commission/unit 4 0.25 $12.50 $0.08 1 0.1 $12.50 $0.08 overtime premium only 6,500 $81,250 $6,400 $40,000 $120,000 $125,000 $180,000 $160,000 $80,000 $220,000 10% 10% $8 $14 $460,000 Revenue Variable Manufacturing Costs Manufacturing Margin Variable Selling and Administration Contribution Margin Fixed Costs Fixed Overhead Fixed Selling and Administration Operating Income $1,400,000 $909,450 $490,550 $140,000 $350,550 B $3,200,000 $1,653,200 $1,546,800 $320,000 $1,226,800 Total $4,600,000 $2,562,650 $2,037,350 $460,000 $1,577,350 $525,000 $400,000 $652,350