Salesmix,threeproducts. TheJanowskiCompanyhasthreeproductlinesofmugs—A,B,andC— w
ID: 2419669 • Letter: S
Question
Salesmix,threeproducts.TheJanowskiCompanyhasthreeproductlinesofmugs—A,B,andC— with contribution margins of $5, $4, and $3, respectively. The president foresees sales of 168,000 units in the coming period, consisting of 24,000 units of A, 96,000 units of B, and 48,000 units of C. The company’s fixed costs for the period are $405,000.
What is the company’s breakeven point in units, assuming that the given sales mix is maintained?
If the sales mix is maintained, what is the total contribution margin when 168,000 units are sold? What
is the operating income?
What would operating income be if the company sold 24,000 units of A, 48,000 units of B, and 96,000
units of C? What is the new breakeven point in units if these relationships persist in the next period?
Comparing the breakeven points in requirements 1 and 3, is it always better for a company to choose
the sales mix that yields the lower breakeven point? Explain.
Explanation / Answer
contribution marging per one mix unit=(24,000*$5+96,000*$4+48,000*$3)/168,000=4.1429
Fixed cost=$405,000
breakeven in units=$405,000/4.1429=97,758
Total contribution margin=168,000*$4.1429=$696,000
Operating income=Total contribution-Fixed cost=$696,000-$405,000=$291,000
Revised mixed contribution per unit=(24000*5+48,000*4+96,000*3)/168,000=$3.5714
New breakeven in units=$405,000/$3.5714=113,401
operating income=168,000*3.5714-$405,000=$195,000
it is always to choose company option 1 because it gives more operating income.
if sales mix have lower brekeven means that already it was meet the fixed cost ( no profit and no loss), after break even what we sales is goes to directly as operating income, so we have to the select the mix which has lower breakeven.
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