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Accounting Jasmine

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Submitted By ELLTHA
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Question 1: What is the company’s overall break-even in total sales dollars?
Frog:
Variable cost = 100,000 * $1.20 = $120,000
Sales = 100,000 * $2.00 = $200,000

Minnow:
Variable cost = 200,000 * $0.80 = $160,000
Sales = 200,000 * $1.40 = $280,000

Worm:
Variable cost = 300,000 * $0.50 = $150,000
Sales = 300,000 * $0.80 = 240,000

The total sales = $200,000 + $280,000 + $240,000 = $720,000
The total variable cost = $120,000 + $160,000 + $150,000 = $430,000

Contribution Margin = the total sales – the total variable cost = $290,000

Contribution Margin Ratio = Contribution Margin / Total Sales = $290,000 / $720,000 = 0.4028

The break-even point in total sales dollars = Fixed expenses / Contribution Margin Ratio = $282,000 / 0.4028 = $700,099

So the company’s overall break-even in total sales dollars is $700,099.

Question 2a: What is the break-even quantity of each product?
Break-even quantity = Fixed Expense / Contribution Margin per unit

Frog: Fixed Expense = $108,000+ $18,000 = $126,000 Contribution Margin per unit = Unit selling price – variable cost per unit = $2.00 - $1.20 = $0.80 Break-even quantity = $126,000 / $0.80 = 157,500 units

Minnow: Fixed Expense = $108,000 + $96,000 = 204,000 Contribution Margin per unit = Unit selling price – variable cost per unit = $1.40 - $0.80 = $0.60 Break-even quantity = $204,000 / $0.60 = 340,000 units

Worm: Fixed Expense = $108,000 + $60,000 = $168,000 Contribution Margin per unit = Unit selling price – variable cost per unit = $0.80 - $0.50 = $0.30 Break-even quantity = $168,000 / $0.30 = 560,000 units

Question 2b: If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? Explain this result.

Frog: Total sales = unit selling price * quantity = $2.00 * 157,500 = $315,000

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