A manufacturer can make two products, A and B. The following data are available
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A manufacturer can make two products, A and B. The following data are available

QUESTION 5 CVP Analysis

A manufacturer can make two products, A and B. The following data are available:B

Product

A

B

Total

Sales price per unit

$12

$15

Variable cost per unit

$8

$10

Total fixed costs/month

$5000

(a)Calculate the unit contribution margin for each product.
(b)This month the manufacturer will specialise in making only Product B. How many does he need to sell to break even?
(c)If they specialise in making only A what is the breakeven sales volume for the month in sales dollars?
(d)He now decides to manufacture both A and B this month in the ratio of 3 of A to 1 of B.
(i)How many of each product must be sold to earn a profit of $3,500 before tax for the month?
(ii)How many of each product must be sold to earn a profit of $8,400 after tax (of 30c in the dollar) for the month?
Hint

Contribution margin as defined for A&B = ( Sales per unit for A/B - Variable Associated Cost per unit A/B)

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