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 $

Homework Answers

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
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