Unit 7.

1.For your first assignment, management has provided the following revenue and cost information:

High-End Set

Economical Set

Sales price

$3,500

per unit

$1,000

per unit

Labor

$875

per unit

$250

per unit

Materials

$1400

per unit

$300

per unit

Direct fixed costs

$25,000

per month

$16,500

per month

Allocated fixed costs

$85,000

per month

$85,000

per month

They want a better understanding of their business to make budgeting and sales goals decisions and have asked you to determine their:

1.Contribution Margins for each product line

2.Break-even quantities for each product line

3.Break-even quantities to earn $500,000 per year margin on the high-end line (at the current sales price)

4.Break-even quantities to earn $300,000 per year margin on the economical line (at the current sales price)

They expect the product lines to fully absorb the costs allocated to them. They have also asked that you show each step in your calculations so that they can understand your analysis. (Note: you will be graded on your intermediary values.)

Once you have determined these amounts, they have asked that you:

present the information

describe how you performed your calculations

and explain what the results mean