Question

In: Accounting

ZZ Company produces and sells four products. Information about these products for 2019, the most recent...

ZZ Company produces and sells four products. Information
about these products for 2019, the most recent year,
appears below:

Product A Product B
selling price per unit $18 $16
variable costs per unit $ 6 $ 5
number of units sold 22,000 36,000

Product C Product D
selling price per unit $17 $13
variable costs per unit $13 $ 7
number of units sold 15,000 20,000

ZZ Company reported total fixed costs of $540,000 in 2019.

Calculate the number of units of Product B that needed to
be sold in 2019 for ZZ Company to earn a net income equal
to $228,600. Simply enter your answer as a number. Do not
type the word units after your answer.

Solutions

Expert Solution

1.If ZZ Company sales only product B during the year, 2019:

Particulars Product B
Selling price per unit $16
variable costs per unit $5
Contribution per unit $11
Fixed Cost $540000
Profit

Sales of product B to earn a profit of $ 228,600 =   Fixed cost + Desired profit/ Contribution per unit

= $540000 + $228600 / $11

= $768600 / $11

= 69873 units

Hence 69873 units of product B to be sold to earn a profit of $ 228,600.

2. If ZZ Company sales all products A, B C, and D  during the year, 2019:

Product A Product B Product C Product D
Selling price per unit $18 $16 $17 $13
variable costs per unit $6 $5 $13 $7
Contribution per unit $12 $11 $4 $6

Fixed Cost = $540000
Profit = $228,600

Sales Mix in quantity A:B:C:D  = 22:36:15:20

Composite contribution per unit = A $12*22/93 + B $11*36/93 + C $ 4*15/93 + D $6*20/93

= $2.84 + $4.26 + $0.65 + $1.29

= $9.04

Total Sales to earn a profit of $ 228,600 =   Fixed cost + Desired profit/ Composite Contribution per unit

= $540000 + $228,600 / $9.04

= 85022 units (Approx)

Sales of Product B = 85022 / 93 * 36

= 32911 units (Approx)

ekkarill92 answered 1 year ago
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