Question

# Manatoah Manufacturing produces 3 models of window air conditioners: model 101, model 201, and model 301....

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 \$

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

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