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Ultimate Jelly Company manufactures two different types of jelly, one with sugar

ID: 2372139 • Letter: U

Question

Ultimate Jelly Company manufactures two different types of jelly, one with sugar (Jelly) and one without sugar (Simply Jelly).


The following information is available for the two products:


Jelly Simply Jelly


Sale Price Per Unit $5 $7


Variable Expense Per Unit $3 $6


Total fixed expenses are estimated at $350,000. One jar of Jelly is sold for every 1 1/2 jars of Simply Jelly.


a)Determine the breakeven sales in units of both products.

b)Compute the target sales in dollars if Ultimate Jelly wants to earn $70,000 in operating income

Explanation / Answer

a)Determine the breakeven sales in units of both products.

Contribution per unit

Product Jelly = $2

Product Simply Jelly = $1

Product mix =1:1/2

Combined contribution of one product mix = 2*1 + 1*1.50 = $3.50

Total fixed Expenses =$350,000

No of product mix to be sold so as to reach break even = 350,000/3.50=100,000

Break Even sales in unit

Poduct Jelly = 100,000 unit

and Product Simply Jelly =150,000 unit


b)Compute the target sales in dollars if Ultimate Jelly wants to earn $70,000 in operating income

No of product mix to be sold so as to reach target sales = (350,000+70000)/3.50=120,000

Target sales in unit

Poduct Jelly = 120,000 unit

and Product Simply Jelly =180,000 unit


Target sale in dollar

Poduct Jelly = 120,000 unit@$5 = $600,000

and Product Simply Jelly =180,000 unit @$7=$1,260,000


Total Target sales = 600,000+1,260,000 = $1,860,000