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The Janowski Company has three product lines of mugs—A, B, and C—with contribution margins of $ 5, $ 4, and $ 3, respectively. The president foresees sales of 168,000 units in the coming period, consisting of 24,000 units of A, 96,000 units of B, and 48,000 units of C. The company’s fixed costs for the period are $ 405,000.
Required
1. What is the company’s breakeven point in units, assuming that the given sales mix is maintained?
2. If the sales mix is maintained, what is the total contribution margin when 168,000 units are sold? What is the operating income?
3. What would operating income be if the company sold 24,000 units of A, 48,000 units of B, and 96,000 units of C? What is the new breakeven point in units if these relationships persist in the next period?
4. Comparing the breakeven points in requirements 1 and 3, is it always better for a company to choose the sales mix that yields the lower breakeven point? Explain.
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