Xiaomi Media sells a range of media and gaming products in package deals. The products sold within bundles are as follows.

	PS5	Apple watch	SpeakerBullet
Selling Price ()	650	150	200
Variable Cost ()	300	75	125

Package A consists of a PS5 and an Apple watch and is sold for a discounted price of 725.

Package B consists of a PS5, an Apple Watch and two speakers and is sold for a discounted price of 875.

Currently packages are sold in a ratio of 2 Package As for every 3 Package Bs and 500 packages are sold each month. Fixed costs are expected to be 120,000 for the month.

Required

1. Calculate the contribution per package for Package A and Package B.
2. marks)
   1. Calculate the break-even point (in number of packages and sales revenue)

2.2.1. If only Package As are sold

2.2.2. If only Package Bs are sold

2.2.3. If both packages are sold in the current sales mix, calculate the breakeven point per

mix first, the units for each product and the total sales revenue.

1. Calculate the margin of safety (in number of bundles and as a percentage) if the current sales mix remains unchanged.
2. Calculate the current expected profit.
3. Calculate the number of packages which need to be sold in order to achieve a profit of 75,000 in the month assuming the sales mix remains unchanged.
4. Write a memo to management which considers:

2.2.1. Which is the best package sell and why?

2.2.2. Whether this selling package is realistic and why or why not?

2.2.3. Explain how else the profitability of the business could be improved, using

academic references where appropriate.

Answer rating: 100% (QA)

To calculate the contribution per package for Package A and Package B we need to subtract the variable cost from the selling price Package A Contribution Selling Price Variable Cost 725 300 425 Packag... View the full answer