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XYZ Company has three products X, Y, and Z. X sells for $20 with a variable cost

ID: 2446127 • Letter: X

Question

XYZ Company has three products X, Y, and Z. X sells for $20 with a variable cost of $8, Y sells for $30 with a variable cost of $21, Z sells for $50 with a variable cost of $40. Fixed costs amount to $214,000. Furthermore, assume that for every 5 units of X that are sold, the company sells 3 units of Y and 2 units of Z.

1) Determine break-even in units and dollars of each product.
2) Assuming a desired profit of $107,000, how much of each product should be sold?
3) Assuming a desired net profit of $149,800 and a tax rate of 30%, how much of each product should be sold?

Explanation / Answer

(A).Berak-Even Iin Units:

(X). Sells = $ 2,14,000 / 20 - 8

17,833.33

= 17,833.33 + 5 more Units Sold

   = 17,838.33 Units

(Y). Sells = $ 2,14,000 / 30 - 21

= 23,777.77

= 23,77.77 + 3more Units Sold

= 23,780.77

(Z). Sells = $ 2,14,000 / 50 - 40

   = 21,400 Units

= 21,400 + 2 more Units Sold

   = 21,402 Units

(B). Fixed Cost + Desired Profit / P.V Ratio

P.v Ratio = Contribution / Sales * 100

   Contribution = Selling Price Per Unit - Variable Cost Per Unit

(X). Contribution = 20 - 8 * 100

   = 1,200

P.V Ratio = 1200 / 20 * 100

= 6,000

(Y). Contribution 30 - 21 * 100

= 900

P.V Ratio = 900 / 30 * 100

= 3,000

(Z). Contribution 50 - 40 * 100

= 1,000

= 1,000 / 50 * 100

= 2000

(C). Sales Required When Profit:

Contribution = 1,49,800 * 30 / 100

= $ 44,940

Berak-Even Iin Units = Fixed Cost / Selling Price Per Unt-Variable Cost Per Unit