Max Company manufactures and sells three products: Good, Better, and Best. Annual fixed costs are $3,315,000, and data about the three products follow.?GoodBetterBestSales mix in units30%50%20%Selling price$250$350$500Variable cost100150250Required: A. Determine the weighted-average unit contribution margin.B. Determine the break-even volume in units for each product.C. Determine the total number of units that must be sold to obtain a profit for the company of $234,000.D. Assume that the sales mix for Good, Better, and Best is changed to 50%, 30%, and 20%, respectively. Will the number of units required to break-even increase or decrease? Explain. Hint: Detailed calculations are not needed to obtain the proper solution.
What will be an ideal response?
A.
| ? | Good | Better | Best |
| Selling price | $250 | $350 | $500 |
| Less: Variable cost | 100 | 150 | 250 |
| Contribution margin | $150 | $200 | $250 |
| Good: $150 × 30% | ? | $45 | ? |
| Better: $200 × 50% | ? | 100 | ? |
| Best: $250 × 20% | ? | 50 | ? |
| Weighted-average CM | ? | $195 | ? |
Good: 17,000 × 30% = 5,100 units
Better: 17,000 × 50% = 8,500 units
Best: 17,000 × 20% = 3,400 units
C. Volume to earn $234,000: ($3,315,000 + $234,000) ÷ $195 = 18,200 units
D. The number of units required would increase since a greater proportion of lower-contribution-margin units (specifically, Good) would be sold.
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