Accounting Assignment Unit 4 (1)

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Identifying Cost Behavior Patterns and Using Cost-volume-profit Analysis for Decision Making University of the People BUS 3304: Managerial Accounting Kirk Fischer October 01, 2023

a) To calculate the weighted average contribution margin per unit, we multiply the contribution margin per unit of each product by its sales mix percentage, and then sum up the results. For the Cell product: Contribution margin per unit = Selling price per unit - Variable cost per unit = $100 - $40 = $60 Contribution margin weighted by sales mix = $60 * 70% = $42 For the GPS product: Contribution margin per unit = Selling price per unit - Variable cost per unit = $400 - $240 = $160 Contribution margin weighted by sales mix = $160 * 30% = $48 Weighted average contribution margin per unit = $42 + $48 = $90 b) To calculate the total units that must be sold to break even, we need to divide the fixed costs by the weighted average contribution margin per unit. Total units to break even = Fixed costs / Weighted average contribution margin per unit Using the given data, the weighted average contribution margin per unit is $90. Total units to break even = $1,800,000 / $90 = 20,000 units c) To calculate the number of units of each product that must be sold to break even, we can use the sales mix percentages. For the Cell product: Break-even units for Cell = Total units to break even * Sales mix percentage For Cell Break-even units for Cell = 20,000 units * 70% = 14,000 units For the GPS product: Break-even units for GPS = Total units to break even * Sales mix percentage For GPS Break-even units for GPS = 20,000 units * 30% = 6,000 units

To break-even, Hi-Tech Incorporated must sell 14,000 units of the Cell product and 6,000 units of the GPS product. d) To calculate the total units that must be sold to earn a monthly profit of $180,000, we need to consider the contribution margin per unit and the fixed costs. Total units to achieve the desired profit = (Fixed costs + Desired profit) / Weighted average contribution margin per unit Using the given fixed costs of $1,800,000 and the weighted average contribution margin per unit of $90: Total units to achieve $180,000 profit = ($1,800,000 + $180,000) / $90 = 22,000 units Therefore, a total of 22,000 units must be sold to earn a monthly profit of $180,000. e) To calculate the number of units of each product that must be sold to earn a monthly profit of $180,000, we can use the sales mix percentages. For the Cell product: Break-even units for Cell = Total units to achieve $180,000 profit * Sales mix percentage For Cell For the GPS product: Break-even units for GPS = Total units to achieve $180,000 profit * Sales mix percentage For GPS Using the given data, the sales mix percentages are 70% for the Cell product and 30% for the GPS product. Break-even units for Cell = $180,000 * 70% = 126,000 units Break-even units for GPS = $180,000 * 30% = 54,000 units. To earn a monthly profit of $180,000, Hi-Tech Incorporated must sell 126,000 units of the Cell product and 54,000 units of the GPS product.

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References Heisinger, K., & Hoyle, J. B. (2012). Managerial Accounting. Creative Commons by-nc-sa 3.0. Retrieved from https://open.umn.edu/opentextbooks/textbooks/managerial-accounting

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