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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Abilene Industries manufactures and sells three products (XX, YY, and ZZ). The sales price and unit variable cost for the three products are as follows:
Their sales mix is reflected as a ratio of 4:2:1. Annual fixed costs shared by the three products are $345,000 per year.
- What are total variable costs for Abilene with their current product mix?
- Calculate the number of units of each product that will need to be sold in order for Abilene to break even.
- What is their break-even point in sales dollars?
- Using an income statement format, prove that this is the break-even point.
Transcribed Image Text:PB7. LO 3.4 Abilene Industries manufactures and sells three products (XX, YY, and ZZ). The
sales price and unit variable cost for the three products are as follows:
Product
XX
Sales Price
per Unit
$75
60
55
Variable Cost
per Unit
$45
25
15
ZZ
Their sales mix is reflected as a ratio of 4:2:1. Annual fixed costs shared by the three products
are $345,000 per year.
A. What are total variable costs for Abilene with their current product mix?
B. Calculate the number of units of each product that will need to be sold in order for
Abilene to break even.
C. What is their break-even point in sales dollars?
D. Using an income statement format, prove that this is the break-even point.
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Contribution - This is an important component for a businessman to understand the amount he is getting as a contribution through sales. This contribution does not include variable cost
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