Question

Multiple Product Break-Even and Net Income Planning
Grand Company manufactures and sells the following three products:

	Economy	Standard	Deluxe
Unit sales	10,000	6,000	4,000
Unit sales price	$50	$58	$70
Unit variable cost	$30	$32	$36

Assume that total fixed cost is $344,400.

a. Compute the net income before income tax based on the sales volumes shown above.

	Economy	Standard	Deluxe
Unit contribution margin	Answer	Answer	Answer
Total contribution margin	Answer	Answer	Answer

Net income before income tax: $Answer

b. Compute the break-even point in total dollars of revenue and in unit sales volume for each product.
Enter product mix answers in decimal form.

Product	Product Mix	Contribution Margin per unit	Weighted average unit contribution margin
Economy	Answer	Answer	Answer
Standard	Answer	Answer	Answer
Deluxe	Answer	Answer	Answer
			Answer

Break-even Answer units   

Product	Break -even Units	Unit Sales Price	Break-even Sales Revenue
Economy	Answer	Answer	Answer
Standard	Answer	Answer	Answer
Deluxe	Answer	Answer	Answer
			Answer

c. Prove your break-even calculations by computing the total contribution margin related to your answer in requirement (b).

Product	Break -even Units	Unit Contribution Margin	Total Contribution Margin
Economy	Answer	Answer	Answer
Standard	Answer	Answer	Answer
Deluxe	Answer	Answer	Answer
			Answer

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Answer 1

A. Calculation of net income before income tax

	Economy	Standard	Deluxe
Unit contribution margin	20	26	34
Total contribution margin	$200,000	156,000	136,000

Unit contribution margin= selling price per unit - variable cost per unit

Economy= 50-30=20

Standard=58-32=26

Deluxe=70-36=34.

Total contribution margin= unit sales × contribution margin per unit

Economy=10,000×20= 200,000

Standard=6,000×26= 156,000

Deluxe= 4,000×34= 136,000.

Net income before tax= total contribution margin- total fixed cost

= 492,000- 344,400= $147,600.

B.

Product	Product mix	contribution margin per unit	weighted average contribution margin
Economy	0.5	20	10
Standard	0.3	26	7.8
Deluxe	0.2	34	6.8
			24.6

Break even answer units

	Break even units	unit sales price	break even sales revenue
Economy	7,000	50	350,000
Standard	4,200	58	243,600
Deluxe	2,800	70	196,000
			789,600

Break even units =( fixed cost ÷total weighted average contribution margin)×weighted average contribution margin

Economy=( 344,400÷24.6)×10= 14,000

Standard= (344,400÷24.6)×7.8= 4,200

Deluxe= (344,400÷24.6)×6.8= 2,800.

C. Computation of total contribution margin

Product	Break even units	unit contribution margin	total contribution margin
Economy	7,000	20	140,000
Standard	4,200	26	109,200
Deluxe	2,800	34	95,200
			344,400

____×____

All the best

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