Smarty Inc. Ltd produces two different products with the following monthly data: P1 P2 Total Selling price per unit $100 $12 Variable cost per unit $ 60 $ 3 Expected unit sales 21,000 14,000 35,000 Sales mix 60 percent 40 percent 100 percent Fixed costs $750,000 Assume the sales mix remains the same at all levels of sales. How many units of each product must be sold to earn a monthly profit of $100,000? Prepare a contribution margin income statement for the month. If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain.
Smarty Inc. Ltd produces two different products with the following monthly data: P1 P2 Total Selling price per unit $100 $12 Variable cost per unit $ 60 $ 3 Expected unit sales 21,000 14,000 35,000 Sales mix 60 percent 40 percent 100 percent Fixed costs $750,000 Assume the sales mix remains the same at all levels of sales. How many units of each product must be sold to earn a monthly profit of $100,000? Prepare a contribution margin income statement for the month. If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Smarty Inc. Ltd produces two different products with the following monthly data:
|
|
P1 |
P2 |
Total |
|
Selling price per unit |
$100 |
$12 |
|
|
Variable cost per unit |
$ 60 |
$ 3 |
|
|
Expected unit sales |
21,000 |
14,000 |
35,000 |
|
Sales mix |
60 percent |
40 percent |
100 percent |
|
Fixed costs |
|
|
$750,000 |
Assume the sales mix remains the same at all levels of sales.
- How many units of each product must be sold to earn a monthly profit of $100,000?
- Prepare a contribution margin income statement for the month.
- If the sales mix shifts more toward the P1 product than the P2 product, would the break-even point in units increase or decrease? Explain.
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