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 1. What is the break-even point in sales for product A, B, and C?

.

First calculate the weighted average contribution margin ratio for the product mix.

.

Calculate the contribution margin ratio per unit for each product individually:

contribution margin ratio = Contribution margin per units / Selling price of each units

Product

A

B

C

Contribution margin per units

6

3

3

Selling price of each units

8

5

4

contribution margin ratio

6 / 8

=0.75

3 / 5

=0.60

3/4

=0.75

.

Divide the fixed costs by the contribution margin ratio to calculate the break-even sales for three products:

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Break-even point in sales revenue = Fixed cost / contribution margin ratio

Break-even point in sales units = Fixed cost / contribution margin per units

.

Product

A

B

C

Fixed cost

4000

7000

1000

Contribution margin ratio

0.75

0.60

0.75

Contribution margin per units

6

3

3

Break-even sales revenue

5333

11667

1333

Break-even point in sales units

667

2333

333

.

2. What is the total profit given the sales mix in the table?

Total contribution - fixed cost = profit

Product A

Product B

Product C

Total

Contribution (units * Contribution per units )

600*6

=3600

4000*3

=12000

400*3

=1200

$16800

Fixed cost

4000

7000

1000

$12000

Total Profit

$4800

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