Reference no: EM132911129

XYZ sells three products: Red, Blue and Yellow. The company has annual fixed costs of $ 280,000.  Last year, the company sold the three products: Red, Blue and Yellow in the ratio of 5:3:2.

The accounting department has compiled the following data related to the three products:

                                           Red            Blue               Yellow

Price per product           $15            $25              $13

Variable cost per product   $8             $12               $7

Required:

Problem 1: Calculate the break-even point in units and in sales dollars (in total and per product) for XYZ. Assume a constant sales mix.

Problem 2: How many units of each product needs to be sold to earn a target net profit of $100,000? Assume a constant sales mix.

Problem 3: List any two assumptions that managers must make in CVP calculations and how are they critical to decision making.