Task 1: Multi-level contribution margin calculation

A company is divided into two divisions and produces and sells six types of products:

• Division I only includes product group A with products A1, A2 and A3. Division II comprises product group B with products B1 and B2 as well as product group C with currently only one product.
• Fixed costs of $ 600,000 are incurred for the company's central departments during the period.

• The following values are determined as attributable fixed product costs for the individual products:

A1 ($ 50,000), A2 ($ 80,000), A3 ($40,000), B1 ($ 50,000), B2 ($ 210,000) and C ($ 200,000).

• The distribution of the products A1, A2 and A3 on the one hand and the distribution of the products B1 and B2 on the other hand are carried out by independent sales departments for the fixed costs of

750,000 $ or 200,000 $ can be determined.

• The coordination of the decisions concerning product groups B and C in Division II leads to fixed costs of $ 200,000.

• The following net revenues are achieved for the various products in the period:

A1 ($1,000,000), A2 ($ 800,000), A3 ($ 700,000), B1 ($ 500,000), B2 ($ 400,000) and

C ($1,200,000).

• The following values were determined as allocable variable costs for the various products:

A1 ($400,000), A2 ($ 300,000), A3 ($ 300,000), B1 ($ 200,000), B2 ($ 200,000) and C ($ 700,000).

1) Create a period-related, step-by-step fixed cost coverage calculation based on this information!

(2) What product range policy recommendations would you give the company based on your invoice?