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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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