Question

The Noble Company manufactures two products. Information about the two products is as follows: Product A...

The Noble Company manufactures two products. Information about the two products is as follows:

Product A Product B
Selling price per unit $80 $30
Variable costs per unit 45 15
Contribution margin per unit $35 $15

The company expects the fixed costs to be $189,000. The firm expects 60% of its sales (in units) to be of Product A (a sales mix of 3:2).

Required:

A. Calculate the contribution margin per package.
$

B. Determine the break-even point in units for Product A and Product B.

Product A units
Product B units

C. Determine the level of sales (in dollars) necessary to generate an operating income of $135,000.

Business   Accounting   
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Homework Answers

Answer #1

A. contribution margin per package = 35*60%+15*40% = $27

B. break-even point in units = 189000/27 = 7000 units

break-even point in units for Product A = 7000*60% = 4200 units

break-even point in units for Product b = 7000*40% = 2800 units

C. Break-even point in units for target profit = (189000+135000)/27 = 12000 units

break-even point in units for Product A = 12000*60% = 7200 units

break-even point in units for Product b = 12000*40% = 4800 units

level of sales (in dollars) = 7200*80+4800*30 = $720000

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