Answered: a) Calculate the weighted average unit…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

International Printer Machines (IPM) builds three computer printer models: Alpha, Beta, and Gamma. Information for these three products is as follows:

	Alpha	Beta	Gamma	Total
Selling price per unit	$250	$400	$1500
Variable cost per unit	$80	$200	$800
Expected unit sales (annual)	12000	6000	2000	20000
Sales mix	50%	40%	10%	100%

Total annual fixed costs are $5,000,000. Assume the sales mix remains the same at all levels of sales.

Required:

a) Calculate the weighted average unit contribution margin, assuming a constant sales mix.

b) How many units of each printer must be sold to break even?

c) i) Explain what margin of safety is?

ii) Calculate in sales units the margin of safety for IPM, assuming projected sales are 25,000units?

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