Smarty Inc. Ltd produces two different products with the following monthly data: P1 P2 Total Selling price per unit $100 $12 Variable cost per unit $ 60 $ 3 Expected unit sales 21,000 14,000 35,000 Sales mix 60 percent 40 percent 100 percent Fixed costs $750,000 Assume the sales mix remains the same at all levels of sales. d) How many units of each product must be sold to earn a monthly profit of $100,000? e) Prepare a contribution margin income statement for the month. f) If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain. (Detail calculations are not necessary but may be helpful in confirming your answer.)
Smarty Inc. Ltd produces two different products with the following monthly data: P1 P2 Total Selling price per unit $100 $12 Variable cost per unit $ 60 $ 3 Expected unit sales 21,000 14,000 35,000 Sales mix 60 percent 40 percent 100 percent Fixed costs $750,000 Assume the sales mix remains the same at all levels of sales. d) How many units of each product must be sold to earn a monthly profit of $100,000? e) Prepare a contribution margin income statement for the month. f) If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain. (Detail calculations are not necessary but may be helpful in confirming your answer.)
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 6EA: Marlin Motors sells a single product with a selling price of $400 with variable costs per unit of...
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Question
Smarty Inc. Ltd produces two different products with the following monthly data:
|
|
P1 |
P2 |
Total |
|
Selling price per unit |
$100 |
$12 |
|
|
Variable cost per unit |
$ 60 |
$ 3 |
|
|
Expected unit sales |
21,000 |
14,000 |
35,000 |
|
Sales mix |
60 percent |
40 percent |
100 percent |
|
Fixed costs |
|
|
$750,000 |
Assume the sales mix remains the same at all levels of sales.
- d) How many units of each product must be sold to earn a monthly profit of $100,000?
- e) Prepare a contribution margin income statement for the month.
- f) If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain. (Detail calculations are not necessary but may be helpful in confirming your answer.)
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