Question

Please show work. Thanks.

Group Problem 5 Mendez Company has three products, tote bags H, J, and K. The president plans to sell 200,000 units during the next period, consisting of 80,000 H, 100,000 J, and 20.000 K. The products have unit contribution margins of $2, $3, and $6, respectively. The company's fixed costs for the period are $406,000. Required: d. Compute the planned operating income. Compute the breakeven point in units, assuming that the given sales mix is maintained. e. Suppose 80,000 units of H, 80,000 units of J, and 40,000 units of K are sold. Compute the breakeven point in units if these relationships persist in the next period.

Answer 1

d) Planned operating income

	H	J	K	Total
Contribution margin	80000*2 = 160000	100000*3 = 300000	20000*6 = 120000	580000
Fixed cost				406000
Operating income				174000

Weighted average contribution margin per unit = (2*.40+3*.50+6*.10) = 2.90

Break even unit = 406000/2.9 = 140000 Units

Product H = 140000*40% = 56000 Units

Product J = 140000*50% = 70000 Units

Product K = 14000 Units

2) Weighted average contribution margin per unit = (2*.40+3*.40+6*.20) = 3.20

Break even unit = 406000/3.2 = 126875 Units

Product H = 126875*40% = 50750

Product J = 50750

Product K = 25375