Reference no: EM131627028

Question: A company produces and sells two products with the following costs:

                                               Product X                   Product Y

Variables costs (per £ of sales)        £0.45                        £0.60

Fixed costs                                  £1,212,000 per period

Total sales revenue is currently generated by the two products in the following proportions:

Product X             70%

Product Y             30%

Required: (a) Calculate the break-even sales revenue per period, based on the sales mix assumed above.

(b) Prepare a profit volume chart of the above situation for sales revenue up to £4,000,000. Show on the same chart the effect of a change in the sales mix to Product X 50%, Product Y 50%. Clearly lindicate on the chart the break-even point for each situation.

(c) Of the fixed costs £455.000 are attributable to Product X. Calculate the sales revenue required on Product X in order to recover the attributable fixed costs and provide a net contribution of £700.000 towards general fixed costs and profit.