Sales mix, three products. The Ronowski Company has three product lines of belts—A, B, and C— with contribution margins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company’s fixed costs for the period are $255,000.What is the company’s breakeven point in units, assuming that the given sales mix is maintained?If the sales mix is maintained, what is the total contribution margin when 200,000 units are sold? What is the operating income?What would operating income be if 20,000 units of A, 80,000 units of B, and 100,000 units of C were sold? What is the new breakeven point in units if these relationships persist in the next period?

Question
Asked Dec 20, 2019
72 views

Sales mix, three products. The Ronowski Company has three product lines of belts—A, B, and C— with contribution margins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company’s fixed costs for the period are $255,000.

  1. What is the company’s breakeven point in units, assuming that the given sales mix is maintained?
  2. If the sales mix is maintained, what is the total contribution margin when 200,000 units are sold? What is the operating income?
  3. What would operating income be if 20,000 units of A, 80,000 units of B, and 100,000 units of C were sold? What is the new breakeven point in units if these relationships persist in the next period?
check_circle

Expert Answer

Step 1

1. Compute the company’s breakeven point in units assuming sales mix as shown below:

help_outline

Image Transcriptionclose

Contribution of = Contribution of A +Contributi on of B+Contribution of C sales mix (In proportion) (100,000 ×$2 80, 000 x$1 20,000 x $3 20,000 20,000 20,000 = $3+$10+ $4 = $17 (Per portion Fixed cost Break-even units of sales mix Contribution of sales mix $255, 000 $17 =15,000 units Break-even units of company on sales mix Break-even Break- units per even proportion of sales mix Proportion product 15,000 15,000 15,000 units of Product Product A Product B Product C Total break even units 15,000 5 75,000 60,000 150,000 4

fullscreen
Step 2
  1. Compute total contribution margin when 200,000 units are sold, and operating income as shown below:
help_outline

Image Transcriptionclose

Contribution margin for sales of 200,000 units. Break- even Contribution units of margin per Sales Units unit (A) product Product (B) 20,000 $60,00o 100,000 $200,000 80,000 $80,000 200,000 S340,000 (A×B) Product A Product B Product C Total $3 $2 $1 Operating income for sales of 200,000 units. Amount ($) $340,000| $255,000 Particulars Total contribution margin Less: Fixed cost Operating income S85,000 Therefore, total contribution margin is $340,000 and operating income is $85,000.

fullscreen
Step 3

3. Compute operating income and new break-even point for sale of 20,000 units of ...

help_outline

Image Transcriptionclose

Contribution of = Contribution of A +Contributi on of B+Contribution of C sales mix (In proportion) 20.000 x $3 20,000 (100,000 |x$1 20,000 80,000 x $2|+ 20,000 = S3+$8+$5 %3D = $16 (Per portion Fixed cost Break-even units of sales mix Contribution of sales mix $255,000 $16 =15,938 units New break-even units of company Break-even Break- units per Proportion even proportion of of new sales units of Product sales mix mix product Product A Product B Product C Total new break even units 15,938 15,938 15,938 15,938 4 63,752 79,690 159,380 5

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: SEALIFE Company uses the percentage of receivable method in estimating uncollectible accounts receiv...

A: Account receivables refers to the account of all those from whom the company has to receive an amoun...

question_answer

Q: Demarco Lee invested $60,000 in the Camden and Sayler partnership for ownership equity of $60,000. P...

A: Partnership It is that form of organization which is owned and managed by two or more persons who in...

question_answer

Q: Seamus Industries Inc. buys and sells investments as part of its ongoing cash management. The follow...

A: Click to see the answer

question_answer

Q: On the first day of its fiscal year, Ebert Company issued $50,000,000 of 10-year, 7% bonds to financ...

A: a. 

question_answer

Q: What is the closing process?

A: Closing Process: Closing process is a process which consists of journalizes the closing entries of a...

question_answer

Q: The two main inventory accounting systems are the Perpetual and periodic. purchase and sale. return...

A: Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a...

question_answer

Q: Lava Lake Inc. bottles and distributes spring water. On February 11 of the current year, Lava Lake r...

A: a. 

question_answer

Q: Tommy John is going to receive $1,000,000 in three years. The current market rate of interest is 10%...

A: a.determine the present value of this amount compounded annually.

question_answer

Q: Which account does a merchandiser use that a service company does not use? Cost of Goods Sold Merch...

A: