Question

Kamili Company sells two different products. Please give the steps of the question'product mix' and 'breakeven sales revenue'.

No explanation is required for all journal entries. Show all supporting calculations. Problem 2 (14 points) Kamili Company sells two different products. Following are the monthly revenues and costs, Product A Sales Quantity........... ..... 30,000 units Price per Unit.. ........ $10 Contribution Margin Percentage...............70% Product B Sales Quantity.... 20,000 Units Price per Unit..... ..... ....... $5 Contribution Margin Percentage......... ....40% Total fixed costs are $500,000. Product mix does not change. Answer the following questions: Product Mix (4pts) Breakeven Sales Revenue (10pts)

Answer 1

a.

The product mix would be simply 30,000 to 20,000 units of A and B i.e. 3:2 as there is no limiting factor on cards to adjust to.

b.

Contribution margin

A = 10 * 70% = $ 7

B = 5 * 40% = 2

Weighted contribution margin per unit = (7 x 3 + 2 x 2)/ (3 + 2) = $ 5

Break even sales quantity = Total fixed costs/Weighted contribution margin per unit = 500,000/5 = 100,000

Breakeven for Product A as:

Sales quantity of product A at break even level = 100,000 x 3/5 = 60,000

Sales revenue of product A at break even level = 60,000 x 10 = $ 600,000

Breakeven for product B as:

Sales quantity of product B at break even level = 100,000 x 2/5 = $ 40,000

Sales revenue of product B at break even level = 40,000 x 5 = $ 200,000

Therefore.

Break even sales revenue = 600,000 + 200,000 = $ 800,000