Question

Company manufactures two products. Information about the two products is as follows: Product A Product B $80 $30 Selling sales price per unit Variable Costs per unit $45 $15 The company expects fixed costs to be $189,000. The firm expects 60% of its sales (in units) to be Product A A. Determine the break-even point in units for Products A and B B. Determine the level of sales (in dollars) necessary to generate opening income of $155,000

Answer 1

A)	Sales Mix 60:40
	Contribution Margin Per Unit = Sale price - Variable Cost
	Product A =$80-$45 =$35
	Product B = $30-15 =$15
	Sales Mix Contribution Margin = (60%*35)+ (40%*15)
	=$27 per mix
	Break-even Point In Sales Mix = Fixed Cost/ Contribution Margin Per Sales Mix
	= $189000/27
	=7000 Mix
	Break Even Point
	Product A = 7000*60%			4200	Units
	Product B = 7000*40%			2800	Units
B)	Sales dollar need for profit $155000
	Sales Mix = (Desired Profit +Fixed Cost)/ Contribution Margin Per Sales Mix
	=($155000+189000)/$27
				344000
	=12740.74 units			12740.74
					Selling price	Sales Revenue
	Product A = 12740.74*60%			7644.444	80	$ 6,11,555.56
	Product B = 12740.74*40%			5096.30	30	$ 1,52,888.89
	Total			12740.74		$ 7,64,444.44