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  3. 3. morris industries manufactures and sells three

3. Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit...

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Accounting

3.

Morris Industries manufactures and sells three products (AA, BB,and CC). The sales price and unit variable cost for the threeproducts are as follows:

ProductSales Price
per Unit		Variable Cost
per Unit
AA$55     $25     
BB45     20     
CC30     5     

Their sales mix is reflected as a ratio of 5:3:2. Annual fixedcosts shared by the three products are $275,000 per year.

A. What are total variable costs for Morriswith their current product mix?

Total variable costs $

B. Calculate the number of units of eachproduct that will need to be sold in order for Morris to breakeven.

Number of
Units per Product
AA
BB
CC

C. What is their break-even point in salesdollars?

Break-even point in sales $

D. Using an income statement format, prove thatthis is the break-even point. If an amount is zero, enter "0".

Income Statement
Sales
Product AA$
Product BB
Product CC
Total Sales$
Variable Costs
Product AA$
Product BB
Product CC
Total Variable Costs$
Contribution Margin$
Fixed Costs
Net Income$

Answer & Explanation Solved by verified expert
4.1 Ratings (653 Votes)

Product Sales Price Variable Cost
per Unit per Unit Contribution margin Mix Weighted Contribution
AA $55 $25 $30 5 $15.00
BB 45 20 $25 3 $7.50
CC 30 5 $25 2 $5.00
10 $27.50
A. Total variable costs $19.50 (25*5/10+20*3/10+5*2/10)
B. Breakeven in number of units
Weighted contribution per unit = $27.50
Breakeven          10,000
AA 5000 Units
BB 3000 Units
CC 2000 Units
C. Breakeven in sales dollar
AA $275,000 (5000*55)
BB $135,000 (3000*45)
CC $60,000 (2000*30)
D.
Income statement
Sales
Product AA $275,000
Product BB $135,000
Product CC $60,000
Total sales $470,000
Variable costs
Product AA $125,000
Product BB $60,000
Product CC $10,000
Total VC $195,000
Contribution margin $275,000
Fixed costs 275000
Net income $0

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