Question

Insert Layout References Review View Calibri (Body) Help Open in Desktop App Tell me what you want to do U or AA. EE v 16 A A Editing B 1 Question 2: Hea Cascade Builders Inc. produces three products: A, B, and C. The following information is presented for the three products: Fixed Cost 123.500 Units produced Price Per Unit Product A 80 $ 2013 $ 90 Product B 120 $ 400 $ 150 Product 200 $ 700 $ 400 Variable Cost Per Unit Required: 1. Calculate the contribution margin for each product 2. Calculate the break-even point in units of the three products A, B, and C combination based on the sales mix percentage 3. Please give suggestions to the decision makers about how to increase profit based on the CVP analysis 100% English (U.S.) 199 o

Answer 1

Correct Answer:

A:

Product	A	B	C
Contribution margin	$ 110	$ 250	$ 300

B:

Product	Units to be produced
A	100
B	150
C	250

C:

To increase profit the decision maker can:

Increase the sale of number of units, or

Decrease the variable or fixed cost, or

Increase the selling price slightly.

Working:

	Product	A	B	C
A	price per unit	$ 200	$ 400	$ 700
B	Variable cost	$ 90	$ 150	$ 400
C=A-B	Contribution margin	$ 110	$ 250	$ 300

	Product	A	B	C	Total
A	price per unit	$ 200	$ 400	$ 700
B	Variable cost	$ 90	$ 150	$ 400
C=A-B	Contribution margin	$ 110	$ 250	$ 300
D	Sales mix	20%	30%	50%
E=C*D	Weighted average contribution margin	$ 22	$ 75	$ 150	$ 247
F	Fixed cost	$ 123,500
G=F/E	Breakeven point in units	500

	A	B	C=A*B
Product	Breakeven point in units	Sales mix	Units to be produced
A	500	20%	100
B	500	30%	150
C	500	50%	250

End of Answer.

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