Question

Zachary Company produces two products. Budgeted annual income statements for the two products are provided here:

	Power										Lite										Total
	Budgeted	Per					Budgeted				Budgeted	Per					Budgeted				Budgeted	Budgeted
	Number	Unit					Amount				Number	Unit					Amount				Number	Amount
Sales	250	@	$	650		=	$	162,500			1,000	@	$	680		=	$	680,000			1,250	$	842,500
Variable cost	250	@		410		=		(102,500	)		1,000	@		410		=		(410,000	)		1,250		(512,500	)
Contribution margin	250	@		240		=		60,000			1,000	@		270		=		270,000			1,250		330,000
Fixed cost								(25,000	)									(199,400	)				(224,400	)
Net income							$	35,000									$	70,600				$	105,600

    

Required:

1. Based on budgeted sales, determine the relative sales mix between the two products.

2. Determine the weighted-average contribution margin per unit.

3. Calculate the break-even point in total number of units.

4. Determine the number of units of each product Zachary must sell to break even.

5. Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined products.

6. Determine the margin of safety based on the combined sales of the two products.

Answer 1