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 $25 BB 45 10 CC 30 15 Their sales mix is reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $390,000 per year. A. What are total variable costs for Morris with their current product mix? Total variable costs $fill in the blank b93eff02dfbd00d_1 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 fill in the blank b93eff02dfbd00d_2 BB fill in the blank b93eff02dfbd00d_3 CC fill in the blank b93eff02dfbd00d_4 C. What is their break-even point in sales dollars? Break-even point in sales $fill in the blank b93eff02dfbd00d_5
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 | $25 |
| BB | 45 | 10 |
| CC | 30 | 15 |
Their sales mix is reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $390,000 per year.
A. What are total variable costs for Morris with their current product mix?
Total variable costs $fill in the blank b93eff02dfbd00d_1
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 | fill in the blank b93eff02dfbd00d_2 | ||
| BB | fill in the blank b93eff02dfbd00d_3 | ||
| CC | fill in the blank b93eff02dfbd00d_4 |
C. What is their break-even point in sales dollars?
Break-even point in sales $fill in the blank b93eff02dfbd00d_5
A. Determine the composite sales price, variable cost, and contribution margin for each product. The total of the three composite amounts for contribution margin will be used to determine the amount of break-even units (using the total fixed costs). Once the break-even units are determined, use that amount times the composite variable cost to determine the total variable costs.
B. Use the break-even units determined in Part A and the corresponding ratio for each product to determine the total number of units for each product.
C. Use the break-even units for each product times the corresponding sales price to determine the sales dollars amount for each product.
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 | $fill in the blank e757cafb801e069_1 |
| Product BB | fill in the blank e757cafb801e069_2 |
| Product CC | fill in the blank e757cafb801e069_3 |
| Total Sales | $fill in the blank e757cafb801e069_4 |
| Variable Costs | |
| Product AA | $fill in the blank e757cafb801e069_5 |
| Product BB | fill in the blank e757cafb801e069_6 |
| Product CC | fill in the blank e757cafb801e069_7 |
| Total Variable Costs | $fill in the blank e757cafb801e069_8 |
| Contribution Margin | $fill in the blank e757cafb801e069_9 |
| Fixed Costs | fill in the blank e757cafb801e069_10 |
| Net Income | $fill in the blank e757cafb801e069_11 |
Break-even analysis an important technique used by managers of cost departments to analyze the point at where company is not earning any profit nor incurring any loss or in other words it is a point where total revenue of a period is just same as the total costs incurred.
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