Drumbo Quality Safes (DQS) manufactures and sells three models of safes: home, office and banker.
The following is a summary of the three products and DQS fixed costs:
Home
Office
Per Unit
Total
Per Unit
Total
Per Unit
Total
DQS Total
Units sold
8,000
4,000
3,000
Price
$600
$4,800,000
$1,800
$7,200,000
$5,400
$16,200,000
$28,200,000
Variable cost
350
2,800,000
1,250
5,000,000
4,000
12,000,000
19,800,000
Contribution margin
$250
$2,000,000
$550
$2,200,000
$1,400
$4,200,000
$8,400,000
Fixed manufacturing
4,500,000
Fixed selling and administrative
3,000,000
Income
$900,000
Assume the sales mix remains constant in answering the following problems.
a. What is the breakeven level of sales?
b. What level of unit sales is required to earn a target income that is 20% of sales?
