Answered: The J&J Company has three product lines…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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Question

The J&J Company has three product lines of
belts—A, B, and C—having contribution margins of
$3, $2, and $1, respectively. The president foresees
sales up to 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.
(a) What is the company’s break-even point in
units, assuming that the given sales mix is
maintained?
(b) If the mix is maintained, what is the total contribution margin when 200,000 units are sold?
What is the operating income?
(c) What would the operating income become if
20,000 units of A, 80,000 units of B, and 100,000
units of C were sold? What is the new break-even
point in units if these relationships persist in the
next period?

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