Question: A company produces and sells two products with the following costs:
Product X Product Y
Variables costs (per £ of sales) £0.45 £0.60
Fixed costs £1,212,000 per period
Total sales revenue is currently generated by the two products in the following proportions:
Product X 70%
Product Y 30%
Required: (a) Calculate the break-even sales revenue per period, based on the sales mix assumed above.
(b) Prepare a profit volume chart of the above situation for sales revenue up to £4,000,000. Show on the same chart the effect of a change in the sales mix to Product X 50%, Product Y 50%. Clearly lindicate on the chart the break-even point for each situation.
(c) Of the fixed costs £455.000 are attributable to Product X. Calculate the sales revenue required on Product X in order to recover the attributable fixed costs and provide a net contribution of £700.000 towards general fixed costs and profit.