Multiproduct Company produces 3 products. PRODUCT 1 PRODUCT 2 PRODUCT 3 Price/unit $5 $6 $7 Variable cost/unit 3 2 4 Expected Sales (units) 100,000 150,000 250,000 Total fixed costs for the company are $1,240,000. Prepare an Income Statement using the format used in class (and in the text for sales mix) for the 3 products above and the company as a whole. Assuming the product mix would be the same at the break-even point as above, compute the Break-even point in sales dollars. ( use 3 decimal points to calculate CM% ie. .105 = 10.5%) Explain what would happen to the overall contribution ratio if we sold 50,000 units of Product 1, 300,000 units of Product 2, and the same units of Product 3? WHY?

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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Multiproduct Company produces 3 products.

PRODUCT 1 PRODUCT 2 PRODUCT 3

Price/unit $5 $6 $7

Variable cost/unit 3 2 4

Expected Sales (units) 100,000 150,000 250,000

Total fixed costs for the company are $1,240,000.

Prepare an Income Statement using the format used in class (and in the text for sales mix) for the 3 products above and the company as a whole. Assuming the product mix would be the same at the break-even point as above, compute the Break-even point in sales dollars.

( use 3 decimal points to calculate CM% ie. .105 = 10.5%)

Explain what would happen to the overall contribution ratio if we sold 50,000 units of Product 1, 300,000 units of Product 2, and the same units of Product 3?

WHY?

Multiproduct Company produces 3 products.
PRODUCT 1
PRODUCT 2
PRODUCT 3
Price/unit
$5
$6
$7
Variable cost/unit
2
4
Expected Sales (units)
100,000
150,000
250,000
Total fixed costs for the company are $1,240,000.
a) Prepare an Income Statement using the format used in class (and in the text for sales mix)
for the 3 products above and the company as a whole. Assuming the product mix would be
the same at the break-even point as above, compute the Break-even point in sales dollars.
( use 3 decimal points to calculate CM% ie. .105 = 10.5%)
b) Explain what would happen to the overall contribution ratio if we sold 50,000 units of
Product 1, 300,000 units of Product 2, and the same units of Product 3?
WHY?
statement-marks will only be given for the explanation and supporting information).
(It is not necessary to calculate the new breakeven point or a new income

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