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ID: 2394612 • Letter: I
Question
I am struggling with figureing this out as a practicing question! Please show me the work for how to get the correct answers!
XYZ Company reports a sales mix of 40% product A and 60% product B and has a tax rate of 30%. Given the following information, calculate how many bundles (assume that every bundle is 5 total units) must XYZ sell to generate an after tax profit of $250,000
Sales Mix
40% Product A 60% Product B
.40x5=2 .60x5=3
2 Units of Product A per Bundle 3 Units of Product B per Bundle
Product A Product B
Sales Price $500 $750
Direct Materials $75 $100
Direct Labor $125 $150
Variable Overhead $50 $75
Commissions $25 $50
Total Variable Costs: $275 $375
Contribution Margin: 225 375
Fixed Manufacturing overhead: $275,000 per year
Fixed Administrative expenses: $300,000 per year
Total Fixed Costs: $575,000 per year
Explanation / Answer
Let “x” be the total units sold
Product A = 40%
Product B = 60%
Contribution – Fixed cost = Profit
Profit after tax = 250000
Profit before tax = 250000/0.7 = 357143
Contribution of Product A = 225
Contribution of Product A = 375
(40% * x * 225) + (60% * x * 375) – 575000 = 357143
90x + 225x – 575000 = 357143
315x = 932142
X = 2959.18 or 2960
Product A units = 2960 * 40% = 1184
Product B units = 2960 * 60% = 1776
Bundle for Product A = 1184/5 = 237
Bundle for Product B = 1776/5 = 355.2 or 356
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