Question

QUESTION 21

1. Mark Corporation produces two models of calculators. The following information is given:

                                                           X                       Y

   Unit selling price                        $90                 $70

   Unit variable cost                       $60                 $50

   Sales mix is X:Y = 0.6: 0.4 (In terms of units, 60% of total sales are X, and 40% are Y). The fixed costs are $39,000. If the company wants to make a $13,000 profit, it has to sell:

   	A.	X = 1,560 and Y = 1,560
   	B.	X = 990 and Y = 660
   	C.	X = 1,200 and Y = 800
   	D.	X = 900 and Y = 600

Answer 1

Answer- No. of units sold to earn target profit- X = 1200 units.

Y = 800 units.

Explanation- NO of units sold to earn target profit = (Fixed costs+ Target profit)/ Weighted average contribution margin per unit

= ($39000+$13000)/$26 per unit

= 2000 units

X = 2000 units*60% = 1200 units

Y = 2000 units*40%= 800 units

Where- Weighted average contribution margin per unit =Contribution margin per unit* Sales mix percentage

= ($30 per unit*60%)+($20 per unit*40%)

= $18 per unit+$8 per unit

= $26 per unit

Where-Contribution margin per unit = Selling price per unit-Variable cost per unit

X = $90 per unit - $60 per unit = $30 per unit

Y = $70 per unit - $50 per unit = $20 per unit