Question

Manatoah Manufacturing produces 3 models of window air conditioners: model 101, model 201, and model 301. The sales price and variable costs for these three models are as follows:

Product	Sales Price per Unit	Variable Cost per Unit
Model 101	$280	$185
Model 201	350	215
Model 301	405	240

The current product mix is 4:3:2. The three models share total fixed costs of $334,500.

A. Calculate the sales price per composite unit.

Sales price $ per composite unit

B. What is the contribution margin per composite unit?

Contribution margin $ per composite unit

C. Calculate Manatoah’s break-even point in both dollars and units.

Break-even point in dollars $

Break-even point in units  units

D. Using an income statement format, prove that this is the break-even point. If an amount is zero, enter "0".

Income Statement
Sales
Model 101	$
Model 201
Model 301
Total Sales	$
Variable Costs
Model 101	$
Model 201
Model 301
Total Variable Costs	$
Contribution Margin	$
Fixed Costs
Net Income	$

Answer 1

A.

Price per composite unit = ($280 X 4) + ($350 X 3) + ($405 X 2) = $2,980

B.

Contribution margin per composite unit:

= $2,980 - ($185 X 4) + ($215 X 3) + ($240 X 2)

= $1,115

C.

Contribution margin ratio = $1,115 / $2,980 = 37.42%

Breakeven point in dollars = $334,500 / 37.42% = $894,000

Breakeven point in units = $334,500 X 9 / $1,115 = 2,700 units

D.

Sales
Model 101 (2,700 X $280 X 4/9)	$336,000
Model 201 (2,700 X $350 X 3/9)	$315,000
Model 301 (2,700 X $405 X 2/9)	$243,000
Total sales	$894,000
Variable costs
Model 101 (2,700 X $185 X 4/9)	$222,000
Model 201 (2,700 X $215 X 3/9)	$193,500
Mode 301 (2,700 X $240 X 2/9)	$144,000
Total variable costs	$559,500
Contribution margin	$334,500
Fixed costs	$334,500
Net income	$0