Answered: a) Calculate the weighted average unit…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8E

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International Printer Machines (IPM) builds three computer printer models: Alpha, Beta, and Gamma. Information for these three products is as follows:

	Alpha	Beta	Gamma	Total
Selling price per unit	$250	$400	$1500
Variable cost per unit	$80	$200	$800
Expected unit sales (annual)	12000	6000	2000	20000
Sales mix	50%	40%	10%	100%

Total annual fixed costs are $5,000,000. Assume the sales mix remains the same at all levels of sales.

Required:

a) Calculate the weighted average unit contribution margin, assuming a constant sales mix.

b) How many units of each printer must be sold to break even?

c) i) Explain what margin of safety is?

ii) Calculate in sales units the margin of safety for IPM, assuming projected sales are 25,000units?

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