The Lauren Company manufactures two products. Information about the two product lines for the year is as follows:
Product XProduct Y
Selling price per unit$70$100
Variable costs per unit3040
Contribution margin per unit$40$ 60
The company expects fixed costs to be $144,000. The firm expects 60% of its sales (in units) to be Product X.
Required: Determine the break-even point in units for both Product X and Product Y.
8.Thomas Corporation developed the following income statement using a contribution margin approach:
Projected Income Statement
For the Current Year Ending December 31
Less variable costs:
Variable manufacturing costs$280,000
Variable selling costs 120,000
Total variable costs$400,000
Less fixed costs:
Fixed manufacturing costs$130,000
Fixed selling and administrative costs80,000
Total fixed costs$210,000
The projected income statement was based on sales of 100,000 units. Thomas has the capacity to produce 120,000 units during the year.
A.Determine the break-even point in units.
B.The sales manager believes the company could increase sales by 8,000 units if advertising expenditures were increased by $22,000. By how much will income increase or decrease if this plan is put into effect?
C.What is the maximum amount the company could pay for advertising if the sales would really increase by 8,000 units?
9.The following information was extracted from the accounting records of MVP Corporation:
Selling price per unit$60
Variable cost per unit$20
Total fixed costs$480,000
A.What is MVP’s break-even point in units?
B.How many units must be sold to earn operating income of $80,000?
C.What is MVP’s break-even point in units is the selling price increases by 20% and the variable costs decrease by 20%?
D.Using the information in part C, what sales level in dollars is needed to earn an operating income of $80,000?
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