This is where the sales mix is used to determine a weighted average contribution margin [WACM]. The
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Question:
This is where the sales mix is used to determine a weighted average contribution margin [WACM]. The WACM is the contribution margin after weighting the unit contribution margins by its relative sales mix. The calculation of the WACM follows. Sales mix, along with the contribution margin per unit, is used to calculate the WACM for Fajar Plantation Pty, Ltd
Soaps | Candles | Detergents | TOTAL |
Annual volume in units | 60,000 | 25,000 | 15,000 |
Selling price per unit | $ 40 | $ 50 | $ 80 |
Variable cost per unit | $ 30 | $ 30 | $ 44 |
Contribution margin | $ 10 | $ 20 | $ 36 |
Fixed Cost in total | $328,000 |
Sales mix | ? | ? | ? | |
WACM | ? | ? | ? | ? |
Required:
- Explain what benefits can be obtained by companies that have to calculate BEP on multiple products.
- Calculate the sales mix composition for Soap, Candles, and Detergents!
- Calculate the WACM composition for Soaps, Candles, and Detergents!
- Calculate Break Even Point [BEP] multi products in units, rounded nearest, and give your explanation!
- Prepare the statement profit or loss for Fajar Plantation Pty, Ltd showing the contribution to fixed costs by each product at break-even using each product’s sales requirements for break-even and interpret the result! (5 points)
- Are there any disadvantages that we can find in the calculation of BEP with multi-products? if there are, explain clearly!
Related Book For
Accounting Business Reporting For Decision Making
ISBN: 9780730369325
7th Edition
Authors: Jacqueline Birt, Keryn Chalmers, Suzanne Maloney, Albie Brooks, Judy Oliver, David Bond
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