Ultimate Jelly Company manufactures two different types of jelly, one with sugar
ID: 2372139 • Letter: U
Question
Ultimate Jelly Company manufactures two different types of jelly, one with sugar (Jelly) and one without sugar (Simply Jelly).
The following information is available for the two products:
Jelly Simply Jelly
Sale Price Per Unit $5 $7
Variable Expense Per Unit $3 $6
Total fixed expenses are estimated at $350,000. One jar of Jelly is sold for every 1 1/2 jars of Simply Jelly.
a)Determine the breakeven sales in units of both products.
b)Compute the target sales in dollars if Ultimate Jelly wants to earn $70,000 in operating income
Explanation / Answer
a)Determine the breakeven sales in units of both products.
Contribution per unit
Product Jelly = $2
Product Simply Jelly = $1
Product mix =1:1/2
Combined contribution of one product mix = 2*1 + 1*1.50 = $3.50
Total fixed Expenses =$350,000
No of product mix to be sold so as to reach break even = 350,000/3.50=100,000
Break Even sales in unit
Poduct Jelly = 100,000 unit
and Product Simply Jelly =150,000 unit
b)Compute the target sales in dollars if Ultimate Jelly wants to earn $70,000 in operating income
No of product mix to be sold so as to reach target sales = (350,000+70000)/3.50=120,000
Target sales in unit
Poduct Jelly = 120,000 unit
and Product Simply Jelly =180,000 unit
Target sale in dollar
Poduct Jelly = 120,000 unit@$5 = $600,000
and Product Simply Jelly =180,000 unit @$7=$1,260,000
Total Target sales = 600,000+1,260,000 = $1,860,000
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