Multiple Product Break-Even and Net Income Planning Madison Company manufactures
ID: 2517851 • Letter: M
Question
Multiple Product Break-Even and Net Income Planning Madison Company manufactures and sells the following three products: Red Blue Green 20,000 30,000 50,000 Unit sales price $30 $62 $18 Unit variable cost $18 $38 $14 Unit sales Assume that total fixed cost is $324,800. a. Compute the net income before income tax based on the sales volumes shown above. Red Blue Green Unit contribution margin Total contribution margin Net income before income tax $ b. Compute the break-even point in total dollars of revenue and in specific unit sales volume for each product. Enter product mix answers in decimal form. Contribution Margin per unit Weighted average unit contribution margin Product Product MixExplanation / Answer
red
blue
green
total
a-
unit sale price
30
62
18
variable cost per unit
18
34
14
contribution margin per unit
12
28
4
contribution margin in total = selling units*contribution margin per unit
240000
840000
200000
1280000
less fixed cost
324800
net income before income tax
955200
B-
product
product mix = sale of individual/total sales
contribution margin per unit
weighted average contribution margin = product mix*contribution margin per unit
Red
20%
12
2.4
Blue
30%
28
8.4
Green
50%
4
2
total of weighted average contribution margin
12.8
total break even point in units
fixed cost/weighted average contribution margin
324800/12.8
25375
product
Break even units = total break even units*product mix ratio
Unit sales price
break even sales revenue = units in break even point*unit selling price
Red
5075
30
152250
Blue
7612.5
62
471975
Green
12687.5
18
228375
total
852600
c-
product
break even units
unit contribution margin
total contrubution margin
Red
5075
12
60900
Blue
7612.5
28
213150
Green
12687.5
4
50750
total
324800
red
blue
green
total
a-
unit sale price
30
62
18
variable cost per unit
18
34
14
contribution margin per unit
12
28
4
contribution margin in total = selling units*contribution margin per unit
240000
840000
200000
1280000
less fixed cost
324800
net income before income tax
955200
B-
product
product mix = sale of individual/total sales
contribution margin per unit
weighted average contribution margin = product mix*contribution margin per unit
Red
20%
12
2.4
Blue
30%
28
8.4
Green
50%
4
2
total of weighted average contribution margin
12.8
total break even point in units
fixed cost/weighted average contribution margin
324800/12.8
25375
product
Break even units = total break even units*product mix ratio
Unit sales price
break even sales revenue = units in break even point*unit selling price
Red
5075
30
152250
Blue
7612.5
62
471975
Green
12687.5
18
228375
total
852600
c-
product
break even units
unit contribution margin
total contrubution margin
Red
5075
12
60900
Blue
7612.5
28
213150
Green
12687.5
4
50750
total
324800
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