1. Assumptions
* Fixed costs will remain constant even after expansion of production capacity to 90%
* There is only one breakeven point (average of the three products)
* Sales mix is constant (volume of sales of each product line remains constant)
* Sales volume will remain constant
* Selling price and variable cost per unit will remain constant (regardless of changes in sales level)
2. What does next year look like?
a. What is the break-even point?
| Aggregate | A | B | C |
Sales at Full Capacity (Units) | 2000000 | | | |
Sales Mix | | 0.229 | .229 | .543 |
Actual Sales Volume | 1750000 | 400000 | 400000 | 950000 |
Unit Sales Price | 7.2 | 10 | 9 | 4.8 |
Total Sales Revenue | 12600000 | 4000000 | 3600000 | 4560000 |
Variable Cost Per Unit | 4.5 | 8.25 | 4.125 | 1.65 |
Total Fixed Costs | 3690000 | 640000 | 1560000 | 1490000 |
Contribution Margin Per Unit | 2.7 | 1.75 | 4.875 | 3.15 |
Weighted Contribution Margin | 3.224 | 0.4 | 1.114 | 1.71 |
Break-even Point | 1144541 | 236728 | 236728 | 562229 |
b. What level of operations must be achieved to pay the extra dividend, ignoring union demands?
| Aggregate | A | B | C |
Sales at Full Capacity (Units) | 2000000 | | | |
Sales Mix | | 0.229 | 0.229 | 0.543 |
Actual Sales Volume | 1750000 | 400000 | 400000 | 950000 |
Unit Sales Price | 7.2 | 10 | 9 | 4.8 |
Total Sales Revenue | 12600000 | 4000000 | 3600000 | 4560000 |
Variable Cost Per Unit | 4.5 | 7.5 | 3.75 | 1.5 |
Total Fixed Costs | 3690000 | 640000 | 1560000 | 1490000 |
Contribution Margin Per Unit | 2.7 | 2.5 | 5.25 | 3.3 |
Weighted Contribution Margin | 3.6 | 0.55 | 1.26 | 1.79 |
Break-even Point | 1035686 | 236728 | 236728 | 562229 |
c. What level of operations must be achieved to meet the union demands, ignoring bonus dividends?
| | | |
Sales at Full Capacity | 2000000 | | |
Sales Mix | 0.229 | 0.229 | |
Actual Sales...