The Johnston Company has three product lines of beer mugs—​A, ​B, and C—with contribution margins of $6​, $5​, and $3​, respectively. The president foresees sales of 180,000 units in the coming​ period, consisting of 30,000 units of​ A, 90,000 units of​ B, and 60,000 units of C. The​ company's fixed costs for the period are $540,000.   What is the​ company's breakeven point in​ units, assuming that the given sales mix is​ maintained? Begin by determining the sales mix. For every 1 unit of A, how many units of B and C are sold? If the sales mix is​ maintained, what is the total contribution margin when 180,000 units are​ sold? What is the operating​ income? What would operating income be if the company sold 30,000 units of​ A, 60,000 units of​ B, and 90,000 units of​ C? What is the new breakeven point in units if these relationships persist in the next​ period? Comparing the breakeven points in requirements 1 and​ 3, is it always better for a company to choose the sales mix that yields the lower breakeven​ point? Explain.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The Johnston Company has three product lines of beer mugs—​A, ​B, and C—with contribution margins of $6​, $5​, and

$3​, respectively. The president foresees sales of 180,000 units in the coming​ period, consisting of 30,000 units of​ A, 90,000 units of​ B, and 60,000 units of C. The​ company's fixed costs for the period are $540,000.
 
What is the​ company's breakeven point in​ units, assuming that the given sales mix is​ maintained? Begin by determining the sales mix. For every 1 unit of A, how many units of B and C are sold? If the sales mix is​ maintained, what is the total contribution margin when 180,000 units are​ sold? What is the operating​ income? What would operating income be if the company sold 30,000 units of​ A, 60,000 units of​ B, and 90,000 units of​ C? What is the new breakeven point in units if these relationships persist in the next​ period? Comparing the breakeven points in requirements 1 and​ 3, is it always better for a company to choose the sales mix that yields the lower breakeven​ point? Explain.
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