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 is margin of safety ii) Calculate in sales units the margin of safety for IPM, assuming projected sales are 25,000 units?
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
|
$1,500
|
|
|
Variable cost per unit |
$80 |
$200 |
$800 |
|
|
Expected unit sales (annual) |
12,000
|
6,000
|
2,000
|
20,000
|
|
Sales mix
|
50 percent
|
40 percent
|
10 percent
|
100 percent
|
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 is margin of safety
ii) Calculate in sales units the margin of safety for IPM, assuming projected sales are 25,000 units?
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