Max Company manufactures and sells three products Good Bette

Max Company manufactures and sells three products: Good, Better, and Best. Annual fixed costs are $3,280,000, and data about the three products follow Good Better Best Sales mix in units 40% sa% 10% Selling price Variable cost $290 $390 $540 170 120 270 Required A. Determine the weighted-average unit contribution margin. B. Determine the break-even volume in units for each product. C. Determine the total number of units that must be sold to obtain a profit for the company of $287,000 A. Weighted-average CM B. Break-even volume Good Better Best units units units units C. Total number of units

Solution

Answers

Selling Price

Variable cost

Unit Contribution margin

Sales Mix

Weighted Average CM

[A]

[B]

[C = A – B]

[D]

[ C x D]

Good

$                                               290.00

$                           120.00

$                  170.00

40%

$                   68.00

Better

$                                               390.00

$                           170.00

$                  220.00

50%

$                110.00

Best

$                                               540.00

$                           270.00

$                  270.00

10%

$                   27.00

Answers

Working

A. Total Weighted Average CM

$                                               205.00

[68 + 110 + 27]

B. Break Even Volume

[(Fixed Cost/Weighted Avg CM) x Sales Mix%

Good

6400 units

[($3,280,000/$ 205) x 40%]

Better

8000 units

[($3,280,000/$ 205) x 50%]

Best

1600 units

[($3,280,000/$ 205) x 10%]

C. Total Number of Units

16000 units

[6400 + 8000 + 1600] or [$3,280,000 / $ 205]

	Selling Price	Variable cost	Unit Contribution margin	Sales Mix	Weighted Average CM
	[A]	[B]	[C = A – B]	[D]	[ C x D]
Good	$                                               290.00	$                           120.00	$                  170.00	40%	$                   68.00
Better	$                                               390.00	$                           170.00	$                  220.00	50%	$                110.00
Best	$                                               540.00	$                           270.00	$                  270.00	10%	$                   27.00