Max Company manufactures and sells three products: Good, Better, and Best. Annua
ID: 2408138 • Letter: M
Question
Max Company manufactures and sells three products: Good, Better, and Best. Annual fixed costs are $3,280,000, and data about the three products follow Good Better Best Sales mix in units 40% sa% 10% Selling price Variable cost $290 $390 $540 170 120 270 Required A. Determine the weighted-average unit contribution margin. B. Determine the break-even volume in units for each product. C. Determine the total number of units that must be sold to obtain a profit for the company of $287,000 A. Weighted-average CM B. Break-even volume Good Better Best units units units units C. Total number of unitsExplanation / Answer
Answers
Selling Price
Variable cost
Unit Contribution margin
Sales Mix
Weighted Average CM
[A]
[B]
[C = A – B]
[D]
[ C x D]
Good
$ 290.00
$ 120.00
$ 170.00
40%
$ 68.00
Better
$ 390.00
$ 170.00
$ 220.00
50%
$ 110.00
Best
$ 540.00
$ 270.00
$ 270.00
10%
$ 27.00
Answers
Working
A. Total Weighted Average CM
$ 205.00
[68 + 110 + 27]
B. Break Even Volume
[(Fixed Cost/Weighted Avg CM) x Sales Mix%
Good
6400 units
[($3,280,000/$ 205) x 40%]
Better
8000 units
[($3,280,000/$ 205) x 50%]
Best
1600 units
[($3,280,000/$ 205) x 10%]
C. Total Number of Units
16000 units
[6400 + 8000 + 1600] or [$3,280,000 / $ 205]
Selling Price
Variable cost
Unit Contribution margin
Sales Mix
Weighted Average CM
[A]
[B]
[C = A – B]
[D]
[ C x D]
Good
$ 290.00
$ 120.00
$ 170.00
40%
$ 68.00
Better
$ 390.00
$ 170.00
$ 220.00
50%
$ 110.00
Best
$ 540.00
$ 270.00
$ 270.00
10%
$ 27.00