Candies Inc. manufactures and sells two products, marshmallowbunnies and jelly b

Question

Candies Inc. manufactures and sells two products, marshmallowbunnies and jelly beans. The fixed costs are $350,000, and thesales mix is 70% marshmallow bunnies and 30% jelly beans. Theunit selling price and the unit variable cost for each product areas follows:

Products                                            Unit SellingPrice                  Unit Variable Cost

Marshmallowbunnies                        2.40                                        1.00

Jelly beans                                         1.80                                        0.90

Note: a. 280,000 units

Explanation / Answer

1. Break-even for the overall product , E        Fixed costs weighted average contribution margin                          sales            variable cost      CM         % of salesmix              weighted average CM Marshmallows     2.40                 1                  1.40    x    70%          0.98       Jellybeans          1.80 0.90    0.90   x    30%          0.27                                                                                                                                   1.25 Plug in the value in to the formula,'               350,000                   1.25      = 280,000 units. 2. No. of units of Marshmallows and jelly beans to breakeven marshmallows - 280,000 * 70 % = 196,000 units Jelly beans   - 280,000 * 30 %    = 84,000units.

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