5. Gatewood Hills Corporation has three products X, Y, and Z. The company’s fixe

Question

5. Gatewood Hills Corporation has three products X, Y, and Z. The company’s fixed costs are $69,000. The sales mix for its products are 3 units of X, 4 units of Y, and 1 unit of Z. Information about the three products follows: X Y Z Projected sales in dollars $192,000 $192,000 $64,000 Selling price per unit $40 $30 $40 Contribution margin ratio 30% 35% 35% Calculate the company's break-even point in composite units and sales dollars. (Hint: You will need to calculate the selling price of a composite unit and CM of a composite unit to calculate the break-even point in composite units. (2 points) (b) Calculate the number of units of each individual product to be sold at the break-even point. (Check: At break-even point you should have 2,250 units of product X.

X

Y

Z

Projected sales in dollars

$192,000

$192,000

$64,000

Selling price per unit

$40

$30

$40

Contribution margin ratio

30%

35%

35%

X

Y

Z

Projected sales in dollars

$192,000

$192,000

$64,000

Selling price per unit

$40

$30

$40

Contribution margin ratio

30%

35%

35%

Explanation / Answer

1.

2.

The number of units of each individual product to be sold:

X Y Z a) Selling Price Per unit            40.00         30.00         40.00 b) Sales Mix              3.00           4.00           1.00 c) a*b          120.00      120.00         40.00 d) Selling Price of composite Unit          280.00 e) Contribution Margin Ratio 30% 35% 35% f) ( c * e)            36.00         42.00         14.00 g) Cm of Composit Unit            92.00

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