Alphabeta Corporation sells three products: J, K, and L. The following information was taken from a recent budget: K 130,000 $80 65 L 30,000 $75 Unit sales 40,000 $60 Selling price Variable cost 40 50 Total fixed costs are anticipated to be $2,450,000. Required: C. Calculate the number of units of J, K, and L that must be sold to break even. D. If Alphabeta desires to increase company profitability, should it attempt to increase or decrease the sales of product K relative to those of J and L? Briefly explain.

Alphabeta Corporation sells three products: J, K, and L. The following information was taken from a recent budget: K 130,000 $80 65 L 30,000 $75 Unit sales 40,000 $60 Selling price Variable cost 40 50 Total fixed costs are anticipated to be $2,450,000. Required: C. Calculate the number of units of J, K, and L that must be sold to break even. D. If Alphabeta desires to increase company profitability, should it attempt to increase or decrease the sales of product K relative to those of J and L? Briefly explain.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...

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Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
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