Closer Corporation Produces And Sells Two Products Price And

Closser Corporation Produces and Sells Two Products Price Analysis

Closser Corporation produces and sells two products. In the most recent month, Product M50S had sales of $36,000 and variable expenses of $11,280. Product H50G had sales of $49,000 and variable expenses of $17,620. The fixed expenses of the entire company were $46,110. The goal is to determine the closest break-even point for the entire company, considering the sales data and expenses provided.

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Closser Corporation's financial performance analysis requires understanding the interplay between sales, variable expenses, fixed costs, and overall profitability. The key focus here is calculating the break-even point, which is the level of sales at which total revenues equal total expenses, resulting in zero net income.

First, the contribution margin per product must be calculated. For Product M50S, the contribution margin is computed by subtracting variable expenses from sales: $36,000 - $11,280 = $24,720. Similarly, for Product H50G, the contribution margin is $49,000 - $17,620 = $31,380. The total contribution margin for the month is then $24,720 + $31,380 = $56,100.

Next, the contribution margin ratio for the combined products can be calculated by dividing total contribution margin by total sales: ($56,100 / ($36,000 + $49,000)) = $56,100 / $85,000 ≈ 0.6600, or 66.00%. This ratio indicates the proportion of each sales dollar available to cover fixed expenses.

The fixed expenses for the company are given as $46,110. To find the break-even sales in dollars, the formula is: Break-even sales = Fixed expenses / Contribution margin ratio. Substituting the known values gives: $46,110 / 0.66 ≈ $69,864. Efforts are to be rounded and approximate, leading to a close estimate of the break-even point at about $69,864.

This figure signifies the total revenue needed from the combined sales of both products to just cover fixed expenses, with no profit or loss. Analyzing break-even points is crucial for managerial decision-making, particularly in setting sales targets, pricing strategies, and assessing the impact of changing costs or sales volume.

In conclusion, based on the provided data and calculations, the closest break-even point for Closser Corporation is approximately $69,864, indicating the amount of sales revenue needed to offset total fixed costs given the contribution margin ratio computed.

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