Question

ferences Review View Help Open in Desktop App Tell me what you want to А" А В I U A A A .. Ev EvF Quebec Builders Inc. produces three products: A, B, and C. The following information is presented for the three products: Fixed Cost 142,000 Product A Product B 80 120 Units produced $ Product C 200 $ 800 $ 400 Price Per Unit $ $ 600 $ 360 120 Variable Cost Per Unit $ 60 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

Answer 1

A) Contribution margin = Sales price per unit - Variable cost per unit

	Product A	Product B	Product C
Contribution margin	= 120 - 60 = 60	= 600 - 360 = 240	= 800 - 400 = 400

B) Total units produced = 80+120+200 = 400 units

Sales mix for A, B and C = (80/400) : (120/400) : (200/400)

= 20 : 30 : 50

Weighted average contribution margin per unit

= Product A (60*20/100) + Product B (240*30/100) + Product C (400*50/100)

= 284 units

Overall break even point = Fixed cost/Weighted average contribution margin per unit

= 142,000/284 units = 500 units

	Product A	Product B	Product C
Breakeven point	= 500 * 20/100 = 100 units	= 500 * 30/100 = 150 units	= 500 * 50/100 = 250 units

C. Company should focus on product C as it gives the highest contribution margin per unit.