The Barnes Company Manufactures Two Products The Company Expects Fixed Costs to Be £189,000

question 41

Essay

The Barnes Company manufactures two products. Information about the two product lines is as follows:
$\begin{array}{lcc}&\text { Product K } & \text { Product Y } \\\text { Selling price per unit } & £ 80 & £ 30 \\\text { Variable costs per unit } & \underline{45} & \underline{15} \\\text { Contribution margin per unit } & \underline{£ 35} & \underline{£ 15}\end{array}$ The company expects fixed costs to be £189,000. The firm expects 60 per cent of its sales (in units) to be Product K (a sales mix of 3:2).

Required:
a.Calculate the contribution margin per package.
b.Determine the break-even point in units for Product K and Product Y.
c.Determine the level of sales (in pounds) necessary to generate a before-tax profit of £135,000.

Understand how to calculate and interpret the inventory turnover ratio.

Comprehend various financial ratios that affect and reflect the return on common shareholders' equity.

Calculate specific financial ratios using provided company information.

Identify actions that influence a company's profit margin.

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Definitions:

Real GDP

The total market value of all final goods and services produced in a country in a given year, adjusted for inflation.

Constant Returns To Scale

The property whereby long-run average total cost stays the same as the quantity of output changes.

Inputs

Factors including workforce, materials, and funds employed in the process of creating products or offering services.

Production

The process of combining various material inputs and immaterial inputs (plans, know-how) to make something for consumption.