Question

Tiago makes three models of camera lens. Its product mix and contribution margin per unit follow:

Percentage of Unit sales Contribution Margin per unit
Lens A 25 % $ 38
Lens B 40 30
Lens C

35 43


Required:
1. Determine the weighted-average contribution margin per unit. (Round your intermediate calculations and final answer to 2 decimal places.)


2.
Determine the number of units of each product that Tiago must sell to break even if fixed costs are $187,000. (Use Weighted average contribution margin as calculated in Requirement 1. Round your answers to the nearest whole number.)



3. Determine how many units of each product must be sold to generate a profit of $73,000. (Use Weighted average contribution margin as calculated in Requirement 1. Round your answers to the nearestwhole number.)

Answer 1

Tiago

1. Weighted-average contribution margin per unit:

Weighted-Average

Contribution margin

per unit

Lens A $9.5

Lens B 12.0

Lens C 15.05

2. Break-even point (units) for each = Fixed cost/Contribution margin per unit

= Lens A = 4,921 units

Lens B = 6,233 units

Lens C = 4,349 units

3. Units to generate a profit target: = (FC+ Target Profit)/Contribution per unit

Lens A = 6,842 units

Lens B = 8,667 units

Lens C = 6,047 units

Step-by-step explanation:

a) Data and Calculations

Percentage of Contribution Weighted-Average

Unit sales Margin per unit Contribution margin per unit

Lens A 25 % $ 38 $9.5

Lens B 40 30 12.0

Lens C 35 43 15.05

Fixed Costs of $187,000:

Lens A = 25% of $187,000 = $46,750

Lens B = 40% of $187,000 = $74,800

Lens C = 35% of $187,000 = $65,450

Break-even point (units) for each = Fixed cost/Contribution margin per unit

= Lens A = $46,750/$9.5 = 4,921 units

Lens B = $74,800/$12 = 6,233 units

Lens C = $65,450/$15.05 = 4,349 units

Profit of $73,000

Lens A = 25% of $73,000 = $18,250

Lens B = 40% of $73,000 = $29,200

Lens C = 35% of $73,000 = $25,550

Units to generate a profit target: = (FC+ Target Profit)/Contribution per unit

Lens A = ($46,750 + $18,250)/$9.5 = 6,842 units

Lens B = ($74,800 + $29,200)/$12 = 8,667 units

Lens C = ($65,450 + $25,550)/$15.05 = 6,047 units