The Janowski company has three product line A,B,C with contribution margins of 3
ID: 2418798 • Letter: T
Question
The Janowski company has three product line A,B,C with contribution margins of 3,2,1 respectively. The president forsees sales of 240,000 units in the coming period consisting of 24,000 units of A, 120 ,000 units of B, 96,000 units of C. The companies fixed cost for the period are 204,000.
1.) What is the companies break even in units assuming that the given sales mix is maintained (Breakeven in bundles and the breakeven in units for A,B,C)
2.) If the sales mix is maintained, what is the total contribution margin when 240,000 units are sold? What is the operation income?
3.) What would the operating income be if 24,000 units of A, 96000 units of B and 120000 units of C were sold. What is the new breakeven point in units if these relationships persist in the next period?
Please show all the work. Thanks!
Explanation / Answer
1 ) Proportion of A sales = 24000/ 240000 = .10
B sales = 120,000 / 240,00. = .50
c sales = 96,000 / 240,000 = .40
Weighted average contribution = (3* .10) +(2*.50) +(1*.40)
= .3+ 1+ ..4
=1.7
Break evan point = Fixed cost /weighted average contribution
= 204,000 /1.7
= 120,000 units
A= 120,000 * .1 = 12000 units
B= 120,000*.5= 60,000
c= 120,000 *.4 = 48000 units as break evn respectively
2)Total contribution = 240,000 * 1.7 = $408000
Operating income = 408000- 204000 = $ 204000
3)Total contribution in new secenario = (24000*3)+(96000*2)+(120000*1)
= 72000+ 192000+ 120000
= 384000
operating income = 384000- 204000= 180000
New weighted average contibution:
Weight of A = 24000/240000= .1
B = 96000 / 240000= .4
c = 120000/240000= .5
Weighted avergae contribution = (3*.1)+(2*.4)+(1*.5)
= .3 + .8+ .5
= 1.6
BEP = 204000/ 1.6 = 127500 units
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