Zeta Manufacturing Co.

Scenario: Product Costing and Decision Making

Product Details:

• Product X:
  • Selling Price per Unit: $120
  • Variable Cost per Unit: $80
  • Fixed Costs: $300,000

• Product Y:
  • Selling Price per Unit: $150
  • Variable Cost per Unit: $100
  • Fixed Costs: $350,000

Requirements:

1. Contribution Margin and Decision Making:
   • Calculate the contribution margin per unit and contribution margin ratio for Product X and Product Y at Zeta Manufacturing Co. Evaluate which product is more profitable and justify your assessment.

1. Break-Even and Profitability Analysis:
   • Perform a break-even analysis to determine the sales volume and revenue needed for Zeta Manufacturing Co. to achieve profitability. Discuss the implications for cost management and pricing strategies.

1. Product Portfolio Optimization:
   • Zeta Manufacturing Co. is considering introducing a new Product Z with a selling price of $180, variable cost of $120 per unit, and expected fixed costs of $200,000. Evaluate the impact of introducing Product Z on the company's overall profitability.

1. Strategic Investment Decision:
   • The company is contemplating a significant investment in automation technology to reduce variable costs by 15%. Conduct a cost-benefit analysis to determine the feasibility and financial impact of this investment.

1. Long-Term Sustainability Plan:

Develop a long-term sustainability plan for Zeta Manufacturing Co. based on marginal costing principles. Include strategies for product innovation, cost control, and market expansion to ensure sustained profitability.