Requirement 1: What is the company's total fixed costs? What is the variable cost per unit for the RC1 product and the RC2 product?
Requirement 2: What is the contribution margin per unit for the RC1 product and the RC2 product?
Requirement 3: What would break-even sales volume be, assuming a ratio of two RC1s sold for each RC2 sold?
Profit = (Unit CM of RC2 + 2*Unit CM of RC1)*QRC2 - Total Fixed Costs. Solving this equation for a breakeven profit=0 will give the unit sales of RC2 at breakeven. Since the company sells 2 units of RC1 for each unit sold of RC2, you can then solve for QRC1 = 2*RC2.
Requirement 4: (Case Question 2) What level of sales would provide the profit target specified by the parent company of $210,000 for the year? (Assume that they sell all that they produce).
Requirement 5: (Case Question 3) What would be the manufacturing cost per unit if they made and sold only 8,000 RC1 units and 4,000 RC2 units per month? In that case, what would the profit be?
Requirement 6: (Case Question 4) What would profit be if they sold 8,000 RC1 units and 4,000 RC2 units (as in Requirement 5), but produced 10,000 RC1 units and 5,000 RC2 units, putting the unsold units in finished goods inventory?
Attachment:- Exhibit.xlsx