Question
The Ronowski Company has three product lines of beltsA, B, and Cwith contribution margins of $3, $2, and $1, respectively. The president foresees sales of
The
Ronowski
Company has three product lines of
beltsA,
B, and
Cwith
contribution margins of
$3,
$2,
and
$1,
respectively. The president foresees sales of
200,000
units in the coming period, consisting of
20,000
units of A,
100,000
units of B, and
80,000
units of C. The company's fixed costs for the period are
$255,000.
Read the requirements
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.
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 A,
5
units of B are sold, and
4
units of C are sold.
Determine the formula used to calculate the breakeven point when there is more than one product sold, then enter the amounts in the formula to calculate the breakeven point in bundles.
| Fixed costs | Contribution margin per bundle | = | Breakeven point in bundles |
| $255,000 | $17 | = | 15,000 |
| The breakeven point is | 15,000 | units of A, | 75,000 | units of B, and | 60,000 | units of C. |
Requirement 2. If the sales mix is maintained, what is the total contribution margin when
200,000
units are sold? What is the operating income?
|
| A | B | C | Total |
| Units sold |
|
|
|
|
| Contribution margin |
|
|
|
|
| Fixed costs |
|
| 255,000 | |
| Operating income |
|
|
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Financial Accounting Tools for business decision making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
6th Edition
978-1119191674, 047053477X, 111919167X, 978-0470534779
