Answer:
Results are below.
Explanation:
<u>First, we need to calculate the break-even point in units with the desired profit:</u>
Desired profit= $109,000
Break-even point (units)= (Total fixed costs + desired profit) / Weighted average contribution margin
Weighted average contribution margin= (weighted average selling price - weighted average unitary variable cost)
Weighted average contribution margin= (145*0.8 + 197*0.2) - (75*0.8 + 87*0.2)
Weighted average contribution margin= $78
Break-even point (units)= (827,000 + 109,000) / 78
Break-even point (units)= 12,000
<u>For each product:</u>
Nylon= 12,000*0.8= 9,600
Wool= 12,000*0.2= 2,400
<u>Finally, the contribution margin income statement:</u>
<u />
Sales= (9,600*145 + 2,400*197)= 1,864,800
Total variable cost= (9,600*75 + 2,400*87)= (928,800)
Contribution margin= 936,000
Fixed costs= (827,000)
Net operating income= 109,000
