Question

Assume that Bay King Products sells three varieties of canned seafood with the following prices costs: Selling Price per Case $125 $150 $100 Variable Cost per Case $95 $100 $80 Fixed Cost per Month Premium Royal Deluxe Entire firm $246,500 The sales mix (in cases) is 30% Premium, 2090 Royal, and 50% Deluxe.

Answer 1

7. Annual profit would increase by $ 58,800.

	Premium	Royal	Deluxe	Total
Selling Price per Case	$ 125	$ 150	$ 100
Variable Cost per Case	95	100	80
Contribution Margin per Case	$ 30	$ 50	$ 20
Unit Sales ( Annual)	2,160	1,440	3,600
Total Contribution Margin	$ 64,800	$ 72,000	$ 72,000	$ 208,800
Less: Incremental Fixed Costs				150,000
Increase in annual profit				$ 58,800

8. New weighted average contribution margin per unit = $ 30 x 0.30 + $ 35 x 0.20 + $ 20 x 0.50 = $ 26