Nation Inc. sells three products. Last month's results are as follows: P1 P2 P3Revenues$200,000 $300,000 $300,000Variable costs 80,000 280,000 160,000Total fixed costs are $100,000 marketing and $125,000 administrative.Required:(a) What was the operating profit last month?(b) What is Nation's break-even sales volume (at the given mix)?(c) What is Nation's margin of safety?
What will be an ideal response?
(a)
$800,000 ? $520,000 ? $225,000 = $55,000.
(b)
$225,000/($280,000/$800,000) = $642,857.
(c)
$800,000 ? $642,857 = $157,143.
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