Question

Multiple Product Break-Even and Net Income Planning Grand Company manufactures and sells the following three products: Economy Standard Deluxe Unit sales 10,000 6,000 4,000 Unit sales price $49 $57 $69 Unit variable cost $30 $32 $36 Assume that total fixed cost is $354,000. a. Compute the net income before income tax based on the sales volumes shown above. Economy Standard Deluxe Unit contribution margin $ 19 $ 25 $ 33 Total contribution margin 190000 150000 132000 Net income before income tax: $ 118000 b. Compute the break-even point in total dollars of revenue and in unit sales volume for each product. Enter product mix answers in decimal form. Product Product Mix Contribution Margin per unit Weighted average unit contribution margin Economy 0.5 $ 19 $ 9.5 Standard 0.3 7.5 Deluxe 0.2 6.6 23.6 25 33 Break-even 15000 units Product Break-even Units Unit Sales Price Break-even Sales Revenue Economy 0 $ 49 $ Standard Deluxe 69 57 old c. Prove your break-even calculations by computing the total contribution margin related to your answer in requirement (b). Product Break-even Units Unit Contribution Margin Total Contribution Margin Economy 0 $ 19 $ Standard 25 Deluxe 33

Answer 1

b.

Product	Break-even Units	Units Sales Price	Break-even Sales Revenue
Economy	15,000 x 0.5 = 7,500	49	367,500
Standard	15,000 x 0.3 = 4,500	57	256,500
Deluxe	15,000 x 0.2 = 3,000	69	207,000
			$831,000

c.

Product	Break-even Units	Unit Contribution Margin	Total Contribution Margin
Economy	15,000 x 0.5 = 7,500	19	142,500
Standard	15,000 x 0.3 = 4,500	25	112,500
Deluxe	15,000 x 0.2 = 3,000	33	99,000
			$354,000

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