Variable costs for Sheffield Corp. are 40% of sales. Its selling price is $130 p

Question

Variable costs for Sheffield Corp. are 40% of sales. Its selling price is $130 per unit. If Sheffield sells one unit more than break-even units, how much will profit increase?

2. Vaughn Manufacturing has two divisions; Sporting Goods and Sports Gear. The sales mix is 75% for Sporting Goods and 25% for Sports Gear. Vaughn incurs $6890000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The weighted-average contribution margin ratio is

3. Sheffield Corp. can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $88 and takes two machine hours to make and Fancy has a unit contribution margin of $117 and takes three machine hours to make. There are 2400 machine hours available to manufacture a product. What should Sheffield do?

The same total profits exist regardless of which product is made.

Explanation / Answer

1)

After achieving breakeven point, each additional unit sold increases the profit by the amount of contribution per unit.

Contribution per unit = Sales price per unit×(1-Variable cost ratio)

= $130×(1-40%)

= $78

Hence, correct option is $78

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