Question

Mario Company sells two different game consoles--a Premium console and a Standard console. The Premium console sells for $175 and has variable costs of $125. The Standard console sells for $100 and has variable costs of $25. Total fixed costs are $105,750.

A: Mario sells one premium console for every THREE standard consoles sold. What is the breakeven point in total units?
B: How many units of PREMIUM will be sold at the breakeven point?
C: How many units of STANDARD will be sold at the breakeven point?
D: Prepare a net variable costing income statement reflecting an 8% decrease in unit sales. What was the dollar amount of change in the net income? Type the answer as a positive number.

Answer 1

			Premium	Standard	Total
Selling price per unit			175	100
Variable cost per unit			125	25
Contribution margin per unit			50	75
Sales mix (1:3)			0.25	0.75
Weighted Contribution per unit			12.5	56.25	68.75
Break even point: Total fixed cost / Weighted Contribution per unit
		105750 /68.75 = 1538 units
Number of Units of Premium sold: 1538* 0.25 = 385 units
Number of Units of Standard sold: 1538*0.75 = 1153 units
Variable cost Income Statement:
			Premium	Standard	Total
Units sold			354	1061
Sales revenue:
Premium (354 units @ 175)			61950
Standard (1061*100)				106100
Total sales revenue					168050
Less: Variable
Premium (354*125)			44250
Standard (1061*25)				26525
Total variable cost					70775
Contribution margin			17700	79575	97275
Less: Fixed cost					105750
Net loss					-8475
Decrease in Income by ($8475)