Multiproduct CVP, Analyzing Break-Even Point, Target Profit, Degree of Operating Leverage
SewFun Company produces two models of sewing basket. Information about SewFun’s products is given below:
| Product A | Product B |
Sales revenue | $28,000 | $43,000 |
— Variable costs | 11,400 | 18,000 |
Contribution margin | $16,600 | $25,000 |
Total units sold | 780 | 1,820 |
SewFun’s fixed costs total $35,200.
Required:
1.Determine SewFun’s weighted average contribution margin and weighted average contribution margin ratio.
2.Calculate SewFun’s break-even units and break-even sales dollars.
3.Calculate the number of units of each product that will be sold at break even.
4.Calculate the total sales necessary for SewFun to earn a profit of $63,200.
5.Calculate the sales revenue generated from each product line if SewFun earns its target of $63,200 profit.
6.Calculate SewFun’s degree of operating leverage.
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