rn A firm sells two products, A and B, at unit price of $9.24 and $7.69, respectively.

rn

Transcribed Image Text:

A firm sells two products, A and B, at unit price of $9.24 and $7.69, respectively. The sales of A and B are simultaneous, and always in a 1-to-4 ratio. The overall contribution margin ratio is 40 percent, and the break-even point is 15,000 units. Required: 1. 2. 3. Given the above conditions, what are the amounts appropriate to points X, Y, and Z in the graph at the bottom of this page? How many units, in total together, of A and B must be sold in order to arrive at a profit of $24,000 if: a. b. The selling prices and cost behavior patterns now prevailing are maintained. X→ By incurring some extra shipping and sales commission costs, the company can boost volume. The incidence of these costs would be an extra $1.24 per unit for each unit of product A sold in excess of 3,000 units per year and extra $.69 per unit for each unit of product B sold in excess of 12,000 units per year. Assume that the break-even point is 15,000 units under either Plan 2a or Plan 2b. Beyond the break-even point, the total units sold under Plan 2b will exceed the total under Plan 2a by 40 percent. Which pricing plan is more profitable, 2a or 2b? Show computations to support your answer. Z A firm sells two products, A and B, at unit price of $9.24 and $7.69, respectively. The sales of A and B are simultaneous, and always in a 1-to-4 ratio. The overall contribution margin ratio is 40 percent, and the break-even point is 15,000 units. Required: 1. 2. 3. Given the above conditions, what are the amounts appropriate to points X, Y, and Z in the graph at the bottom of this page? How many units, in total together, of A and B must be sold in order to arrive at a profit of $24,000 if: a. b. The selling prices and cost behavior patterns now prevailing are maintained. X→ By incurring some extra shipping and sales commission costs, the company can boost volume. The incidence of these costs would be an extra $1.24 per unit for each unit of product A sold in excess of 3,000 units per year and extra $.69 per unit for each unit of product B sold in excess of 12,000 units per year. Assume that the break-even point is 15,000 units under either Plan 2a or Plan 2b. Beyond the break-even point, the total units sold under Plan 2b will exceed the total under Plan 2a by 40 percent. Which pricing plan is more profitable, 2a or 2b? Show computations to support your answer. Z

Answer rating: 100% (QA)

Answer Explanation One unit of proluct 1 unt of A onE vn... View the full answer