Answer:
Instructions are listed below.
Explanation:
Giving the following information:
The Ronowski Company has three product lines of belts—A, B, and C— with contribution margins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,000 units of C. The company’s fixed costs for the period are $255,000.
First, we need to calculate the weighted participation of each line in the total sales:
Sales= 200,000
A= 20,000/200,000= 0.10
B= 100,000/200,000= 0.50
C= 80,000/200,000= 0.40
1) Break-even point (units)= Total fixed costs / (weighted average selling price - weighted average variable expense)
We don't have the information regarding selling price and variable cost. But we can calculate the weighted average contribution margin:
weighted average contribution margin= contribution margin of A* weighted participation on sales + cm of B* weighted participation on sales + cm of C*weighted participation on sales
weighted average contribution margin= 3*0.10 + 2*0.5 + 1*0.4= 1.7
Break-even point (units)= 255,000/1.7= 150,000 units
2) Total contribution margin= 20,000*3 + 100,000*2 + 80,000= $340,000
Operating income= contribution margin - fixed costs= 340,000 - 255,000= $85,000
3) A= 20,000 units
B= 80,000 units
C= 100,000 units
Total contribution margin= 20,000*3 + 80,000*2 + 100,000= $320,000
Operating income= contribution margin - fixed costs= 320,000 - 255,000= $65,000
4) We have to recalculate the weighted participation in sales:
Sales= 200,000
A= 20,000/200,000= 0.10
B= 80,000/200,000= 0.40
C= 100,000/200,000= 0.50
weighted average contribution margin= 3*0.10 + 2*0.4 + 1*0.5= 1.6
Break-even point (units)= 255,000/1.6= 159,375 units
