The Jervis Company has three product lines of belts - A, B, and C-with contribution margins of $5, $4, and $2, respectively. The president foresees sales of 203,000 units in the coming period, consisting of 29,000 units of A, 116,000 units of B, and 58,000 units of C. The company's fixed costs for the period are $525,000. Read the requirements. Requirement 1. What is the company's breakeven point in units, assuming that the given sales mix is maintained? Begin by determining the sales mix. For every 1 unit of Product A, 4 units of Product B, and 2 units of Product C are sold. Determine the formula used to calculate the breakeven point of the bundle when there is more than one product sold. Then, enter the amounts in the formula to calculate the breakeven point. The breakeven point is units of Product A, units of product B and units of Product C. Requirement 2. If the sales mix is maintained, what is the total contribution margin when 203,000 units are sold? What is the operating income? Requirement 3. What would operating income be if the company sold 29,000 units of A,58,000 units of B, and 116,000 units of C ? What is the new breakeven point in units if these relationships persist in the next period? Rerin hv calculating the operating income. What is the new breakeven point in units if these relationships persist in the next period? The breakeven point of the bundle is bundles. The breakeven point is units of Product A, units of product B and units of Product C. Requirement 4. Comparing the breakeven points in requirements 1 and 3 , is it always better for a company to choose the sales mix that yields the lower breakeven point? Explain. (Select the correct choice with the best explanation.) A. Yes, it is always better to choose the sales mix with the lowest breakeven point because the lowest breakeven point will always B. No. it is not always better to choose the sales mix with the lowest breakeven point because this calculation ignores the fixed costs. result in a higher operating income. The company should consider the fixed costs in order to maximize operating income. C. No, it is not always better to choose the sales mix with the lowest breakeven point because this calculation ignores the demand for the various products. The company should look to and sell as much of each of the 3 products as it can to maximize operaling income even if this means that this sales mix results in a higher breakeven point. D. Yes, it is always better to choose the sales mix with the lowest breakeven point because the lowest breakeven point will always result in a higher contribution margin
