Company produces two products. The following information is available: Product X

Question

Company produces two products. The following information is available: Product X: Selling price per unit- $46, Variable cost per unit- $38. Product Y: Selling price per unit- $36, Variable cost per unit- $24. Total fixed costs are $234,000. The Company plans to sell 21,000 units of Product X and 7,000 units of Product Y. A) Compute the contribution margin for each product. B) What is the expected net income? C) Assume the sales mix is 3 units of Product X for every 1 unit of Product Y. What is the break-even point in units for each product? D) Assume the sales mix is 3 units of Product X for every 2 units of Product Y. What is the break-even point in units for each product?

Explanation / Answer

a) contribution margin for X = (46-38)/46 =17.39% contribution margin for Y = (36-24)/36=33.33% b)expected net income = 17.39%*46*21,000 + 33.33%*36*7000-234000 =17979 c) 17.39%*46*3x + 33.33%*36*x-234000 =0 x= 6500 Product X = 19500 units Product Y = 6500 units

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