Willard’s Company is manufacturer of cosmetic products in Jamaica. Due to the onslaught of the coronavirus (COVID -19), Willard decided to produce two new products to help in reducing the spread of the virus. The following information is available:
Hand Sanitizer Hand Cleaner
Selling price per unit $46 $36
Variable cost per unit $38 $24
Total fixed costs are $234,000. Willard plans to sell 21,000 units of Hand Sanitizer and 7,000 units of Hand Cleaner.
Required:
a) Compute the contribution margin for each product. (3 marks)
b) What is the expected net income? (3 marks)
c) Assume the sales mix is 3 units of Hand Sanitizer for every 1 unit of Hand Cleaner;
What is the break-even point in units for each product? (4 marks)
d) Assume the sales mix is 3 units of Hand Sanitizer for every 2 units of Hand Cleaner;
What is the break-even point in units for each product? (5 marks)