Information regarding the products is summarized (answer attached)
Music Company produces two models, P Diddy and Eminem. Information regarding the products is summarized for the month of April in the following table:
| P Diddy | Eminem | Total |
Number of units | 600 | 400 | 1,000 |
Sales revenue | $24,000 | $12,000 | $36,000 |
Fixed costs | 6,000 | 5,400 | 11,400 |
Variable costs | 12,600 | 3,600 | 16,200 |
Operating Income | $ 5,400 | $ 3,000 | $ 8,400 |
Profit per unit | $9.00 | $7.50 |
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A. How much is the weighted average contribution margin ratio based on sales dolalrs?
B. What level of sales does Music need to earn a before tax profit of $10,000 assuming the current mix?
C. If you were a salesman for Music, which product would you ‘push’ to customers to achieve the highest profit for your company if customers will each spend $2,000 and are indifferent as to which product? Show calculations and briefly justify your answer.
Problem 8 Smith Company produces desk lamps. The budget information for June indicated that production and sales of 800 units at $25 per unit would generate variable costs of $15 per unit and fixed costs of $7.50 per unit.
A. How much is the contribution margin of each desk lamp?
B. How many lamps must be sold to generate profit of $5,000?
C. How much sales dollars must Smith generate to break even?
D. Suppose Smith operates at $5,000 profit during June. By how many units can sales decline before Smith would incur a net loss?
E. What is the accounting name of the concept you calculated in part D?
