CVP Analysis and Sales Mix (Multiple Products). Math Products, Inc., produces two different products with the following monthly data (this is the base case).
Finance Calculator Solar Calculator Total
Selling price per unit $100 $12
Variable cost per unit $ 60 $ 3
Expected unit sales 21,000 14,000 35,000
Sales mix 60 percent 40 percent 100 percent
Fixed costs $750,000
Assume the sales mix remains the same at all levels of sales except for requirement i.
Required:
- Round to the nearest unit of product, hundredth of a percent, and nearest cent where appropriate. (An example for unit calculations is 3,231.15 = 3,231; an example for percentage calculations is 0.434532 = 0.4345 = 43.45 percent; an example for dollar calculations is $378.9787 = $378.98.)
- Calculate the weighted average contribution margin per unit.
- How many units in total must be sold to break even?
- How many units of each product must be sold to break even?
- How many units in total must be sold to earn a monthly profit of $100,000?
- How many units of each product must be sold to earn a monthly profit of $100,000?
- Using the base case information, make a contribution margin income statement for the month similar to the one in Figure 6.5 "Income Statement for Amy's Accounting Service".
- Calculate the weighted average contribution margin ratio.
- Find the break-even point in sales dollars.
- What amount of sales dollars is required to earn a monthly profit of $80,000?
- Assume the contribution margin income statement prepared in requirement d is the company's base case. What is the margin of safety in sales dollars?
- If the sales mix shifts more toward the Finance Calculator product than the Solar Calculator product, would the break-even point in units increase or decrease? Explain. (Detail calculations are not necessary, but may be helpful in confirming your answer.)