The Janowski Company has three product lines of mugs --A, B, and C-- with contri

Question

The Janowski Company has three product lines of mugs --A, B, and C-- with contributin 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.

1. What is the company's breakeven point in units, assuming that the given sales mix is maintained?

2. If the sales mix is maintained, what is the total contribution margin when 168,000 units are sold? What is the operating income?

Explanation / Answer

the company's breakeven point in units= fixed costs for the period are $405,000/1*5+4*4+3*2=$405,000/27=15,000 units.

total contribution margin=24,000*5+96,000*4+48000*3=$648,000.

the operating income=total contribution margin-fixed costs=$648,000-$405,000=$243,000.

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