Answered: Morris Industries manufactures and…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6PA: Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit...

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Question

Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit variable cost for the three products are as follows:

Product	Sales Price per Unit	Variable Cost per Unit
AA	$50	$35
BB	45	10
CC	30	5

Their sales mix is reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $253,000 per year.

A. What are total variable costs for Morris with their current product mix?

Total variable costs $

B. Calculate the number of units of each product that will need to be sold in order for Morris to break even.

	Number of Units per Product
AA
BB
CC

C. What is their break-even point in sales dollars?

Break-even point in sales $

D. Using an income statement format, prove that this is the break-even point. If an amount is zero, enter "0".

Income Statement
Sales
Product AA	$
Product BB
Product CC
Total Sales	$
Variable Costs
Product AA	$
Product BB
Product CC
Total Variable Costs	$
Contribution Margin	$
Fixed Costs
Net Income	$

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