Exercise 1 - Sunshine, Inc. sells a single product. The company's most recent income statement is given below.
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Sales (4,000 units)
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$120,000
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Less variable expenses
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(68,000)
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Contribution margin
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52,000
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Less fixed expenses
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(40,000)
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Net income
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$ 12,000
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Answer each of the following questions and show all work:
a. Contribution margin per unit is:
b. If sales are doubled to $240,000, total variable costs will equal:
c. If sales are doubled to $240,000, total fixed costs will equal:
d. If Sunshine is past the breakeven point and 10 more units are sold, profits will increase by:
e. Calculate how many units must be sold to break even:
Exercise 2 - Yurus Manufacturing Company produces two products, X and Y. The following information is presented for both products:
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Product X
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Product Y
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Selling price per unit
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$36
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$24
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Variable cost per unit
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28
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12
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Total fixed costs - $234,000
Answer each of the following questions and show all work:
Assume the sales mix is 3 units of X for every unit of Y:
a. What is the weighted revenue per unit of composite average product?
b. What is the weighted average variable cost?
c. What is the weighted contribution margin per unit of composite average product?
d. What is the break-even point in units of product X?
e. What is the break-even point in units of product Y?