Problem - Analyzing Multiproduct CVP, Break-Even Point, Target Profit, Margin of Safety
Lindstrom Company produces two fountain pen models. Information about its products follows:
Product A Product B
Sales revenue $ 75,000 $ 125,000
Less: Variable costs 33,000 38,000
Contribution margin $ 42,000 $ 87,000
Total units sold 5,000 5,000
Lindstrom's fixed costs total $78,500.
Required:
1. Determine Lindstrom's weighted-average unit contribution margin and weighted-average contribution margin ratio.
2. Calculate Lindstrom's break-even point in units and in sales revenue.
3. Calculate the number of units that Lindstrom must sell to earn a $150,000 profit.
4. Calculate Lindstrom's margin of safety and margin of safety as a percentage of sales if it sells 8,000 total pens.