Information regarding the products is summarized (answer attached)

Music Company produces two models, P Diddy and Eminem. Information regarding the products is summarized for the month of April in the following table:


P Diddy



Number of units




Sales revenue




Fixed costs




Variable costs




Operating Income

$ 5,400

$ 3,000

$ 8,400

Profit per unit




A.   How much is the weighted average contribution margin ratio based on sales dolalrs?


B.   What level of sales does Music need to earn a before tax profit of $10,000 assuming the current mix?

C.   If you were a salesman for Music, which product would you ‘push’ to customers to achieve the highest profit for your company if customers will each spend $2,000 and are indifferent as to which product? Show calculations and briefly justify your answer.






Problem 8   Smith Company produces desk lamps. The budget information for June indicated that production and sales of 800 units at $25 per unit would generate variable costs of $15 per unit and fixed costs of $7.50 per unit.        

A.  How much is the contribution margin of each desk lamp? 


B.   How many lamps must be sold to generate profit of $5,000?

C.   How much sales dollars must Smith generate to break even?


D.   Suppose Smith operates at $5,000 profit during June. By how many units can sales decline before Smith would incur a net loss? 


E.   What is the accounting name of the concept you calculated in part D?



Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>