Problem: Al Corporation sells three products J, K, and L. The following information was taken from a recent budget:
J K L
Unit sales 40,000 130,000 30,000
Selling price $60 $80 $75
Variable cost 40 65 50
Total fixed costs are anticipated to be $2,450,000.
1. Determine Al's sales mix.
2. Determine the weighted average contribution margin.
3. Calculate the number of units of J, K, and L that must be sold to break even.
4. If Al's desires to increase company profitability, should it attempt to increase or decrease the sales of product K relative to those of J and L? Please explain.