Reference no: EM131767988

AV 2000 Inc. has developed a laser disc and a compact disc which have become popular among young adults. Last year's cost and operating data for the two audio-visual products are presented below:

______Per Unit_______

LaserCompact
Disc Disc
Selling price..................................... $50 $10
Contribution Margin ratio.................... 60% 20%

______Per Year_______
Sales volume in units......................... 5,000 15,000
Fixed costs...................................... $99,000

Required:

1. Prepare last year's contribution income statement showing both amount and percent columns for each product and for the company as a whole.

2. Compute the break-even point in dollars using the company's weighted average CM ratio.

3. Compute the break-even point in units using the weighted average CM. Specify units for each product.

4. The company has developed a third product, and expects to sell 4,000 units of the new product. It will be sold at $25 each, and the variable cost is $17.5 per unit. A market study indicates that the sales of the first two products would not be affected by the new product. Annual fixed costs will remain unchanged. Prepare a contribution income statement for each product and in total.

5. Refer to (4) above. Compute the new break-even point in units. Specify units for each product.