Question

Erumpifier Multiproduct Breakeven Case ABC Company has committed to contracts and other fixed exp...

erumpifier Multiproduct Breakeven Case

ABC Company has committed to contracts and other fixed expenses in the amount of $100,000 per

month. Its four major product lines include the following hair care products:



Structurizers



Volumizers



Derumpifiers



Coagulators (to stop the bleeding)

Anticipated annual volumes for each of the above respectively is: 10,000, 20,000, 30,000, 40,000 units.

Variable costs for each of the above respectively is: $10, $15, $20, $25

Selling price for each of the above respectively is: $20, $60, $50, $75

Required:

1.

Complete the Multiproduct breakeven analysis and:

E.

Is contribution margin profit?

F.

Is the company breaking even? And if so, how much does it make?

G.

What can a company do when it is below breakeven?

Answer 1

Part E to G

	Structurizers	Volumizers	Derumpifiers	Coagulators	Total
Selling price per unit	$                  20	$                  60	$                  50	$                  75
Less: Variable costs per unit	$                  10	$                  15	$                  20	$                  25
Contribution margin per unit	$                  10	$                  45	$                  30	$                  50
Multiply: Anticipated annual volumes	10,000	20,000	30,000	40,000
Total Contribution	$        100,000	$        900,000	$        900,000	$   2,000,000	$    3,900,000
Is contribution margin profit?			Yes,		$    3,900,000
Is the company breaking even? And if so, how much does it make?					Yes
Yes, the company can already achieve break-even level.
Total Contribution					$    3,900,000
Less: Yearly Fixed cost (100000*12 months)					$    1,200,000
Company make operating profit					$    2,700,000
What can a company do when it is below breakeven?
When Company below the break-even then it is adviced that reduce the fixed cost or Improve (Means Increase) contribution margin per unit.