Q23E - Horngren'S Financial And Managerial Accounting

Question

: Analyzing profitability Refer to Exercise E21-22. Assume the sales mix shifted to 50% for each product. Calculate the total amount each product contributed to the coverage of fixed costs and the total contribution margin for the company.

Question: Analyzing profitability Sampler Company sells two products, Sigma and Zeta, with a sales mix of 70% and 30%, respectively. Sigma has a contribution margin per unit of \(26, and Zeta has a contribution margin per unit of \)21. The company sold 700 total units in September. Calculate the total amount each product contributed to the coverage of fixed costs and the total contribution margin for the company.

Step-by-Step Solution

Answer

• The contribution margin by Sigma is $9,100 and Zeta is $7,350. 
• Total contribution margin for the company is $16,450.

Step 1: Calculation of number of units of Sigma and Zeta:

As the sales mix contain both products 50-50 % means the number of units of each product is equal.

Number of Units = Total units x Sales Mix

=700 x 50%

=350.

Step 2: Calculation of the total amount each product contributed to the coverage of fixed costs

Particulars	Sigma	Zeta
Number of units	350	350
Contribution margin per unit	$26	$21
Contribution Margin	$9,100	$7,350

Step 3: Calculation of total contribution margin for the company

 

Step 3: Calculation of total contribution margin for the company