The sales manager of Jorgensen Sales is considering expanding sales by producing three different versions of their product. Each will be targeted by the marketing department to different income levels and will be produced from three different qualities of materials.

The sales manager of Jorgensen Sales is considering expanding sales by producing three different versions of their product. Each will be targeted by the marketing department to different income levels and will be produced from three different qualities of materials.



Answer

	Original	Model # 1	Model # 2	Total
Sales Price	$             50.00	$                35.00	$              25.00
Less: Variable Costs
Material	$             22.50	$                15.00	$              10.00
Direct labor	$             10.00	$                  7.50	$                5.00
Variable Overhead	$               7.00	$                  5.25	$                3.50
Contribution margin	$             10.50	$                  7.25	$                6.50
Sale Mix	0.3	0.2	0.5
	3.15	1.45	3.25
Weight Average Contribution margin				7.85
common Fixed cost	300,000
Average Contribution margin	7.85
Break-Even point in units	38,217
	Original	Model # 1	Model # 2
Break-Even sales	11,465	7,643	124,204
	(0.30 x 38217)	(0.20 x 38,217)	(0.50 x 38,217)