Question

Question 3. Sales mix, three products. The Ronowski Company has three product lines of belts—A, B, and C— with 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. Required: 1. What is the company's breakeven point in units, assuming that the given sales mix is maintained? 2. If the sales mix is maintained, what is the total contribution margin when 200,000 units are sold? What is the operating income? 3. What would operating income be if 20,000 units of A, 80,000 units of B, and 100,000 units of C were sold? What is the new breakeven point in units if these relationships persist in the next period?

Answer 1

The Ronowski company hau thaee COBaeakeven Points in units 150, 000 Unt 20,000 80000 200 O00 1O0,000 sales 107 501 40 200008 20000 200000 100,000 200,000 200,000 ixed Ratio contaibutiOn maagin: A 3x 101 fixed expense mixed Rato cm Baeakeven Point 2 55000 IS0000 Unit

If Sale mix is maintained f 340000 TOTOL Contnibution mangh 8s000 61 OPeaating Incame EXPlanation JOrCy Cont nbution main: A'S Contrby tion mag in L $3 X 20o00) B'S Contaibution maa-gin r 2 X 100000 c'S contmbu Hon morgin I X 80000) TOTCH Conto bution 200000 0000 340000 OPeiating Inome TOTCH ontribution naagin fixed expense $ 340006 255000 85000 OPenating Income New Boegkeven Point F65000 159 375 unit 'S Contnbution maeh20000 x 3 B'S tontnbtlon margn 80000 P 60,000 160,006 C X 2 CS Contnbution marin C100000 TOTGL Contabuton maagin fixed expense 00000 320000 25SO04) 6S000 Less: Opeatiy ancorne

(b) sale mix RaHO A B 107 407 20000 200,000 g0000 100 000 200000 200000 200000 sales mix contabution margin C$3X10 t E 2x y0/) + CIXSO) O.3 t $ 16 O8 t Pes Unit Beeakeven lonits) fixea exp CM Per Unlt P 255000 1 6 IS9375 Units