CVP in a Multi-Product Environment
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The following is budgeted information for Connor Corporation:
Product XYZ Product ABC
Annual production & sales 25,000 15,000
Projected selling price $70 $90
Variable Direct Production Cost Information
Materials (per unit) $12 $18
Direct Labor (per unit) $10 $16
Additional Information:
- Manufacturing overhead costs (a mixed cost) are budgeted to be $430,000 at the production and sales listed above. The variable component is $4 per unit (same for each product).
- Selling & administrative costs (a mixed cost) are budgeted to be $350,000 at the production and sales listed above. The fixed component is $150,000, and each product uses the same amount of variable selling and administrative costs per unit.
A. Assuming the budgeted sales mix remains intact, how many units of each product does Connor need to sell in order to break-even?
B. Assuming the budgeted sales mix remains intact, how many units of each product does Connor need to sell in order to earn an operating income of $210,000?
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Solution Summary
This solution illustrates how to compute the break-even number of units that need to be sold of each product and the number of units that need to be sold of each product to earn a target profit when the company sells multiple products.
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