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? (3 marks) 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? (3 marks)
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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