Reference no: EM132556860

Accessories Ltd use to make and sell only one type of smart watch but in order to survive in a competitive market the company has recently expanded its line and added another two products. Currently the company has three smart watches, the "Stylish" which sells for $200, the "Cloud" which sells for $150 and the "MP9" which sells for $180. Given the company has only just branched out with multiple products it requires the assistance of the Management Accountant to perform some CVP analysis.

Additional Information:

                                              Stylish                             Cloud                                 MP9

Sales (units)                     30,000                         45,000                      37,500

Direct Labour                     $10.00                          $22.00                       $41.00

Variable Selling Expenses          $15.00                         $13.00                 $10.00

Electrical components                $5.00                          $5.00                    $5.00

Based on the increase in demand, forecasted sales volume for the "MP9" is expected to double whilst the sales volume of the other two units will remain the same. The company recently received a letter from their suppliers informing them that the direct materials which are used for making the "Stylish" will increase by $10 per unit and the variable selling of the MP9 will increase by $8. Fixed cost for the company are said to be $246,000

Answers to all questions are required: (where necessary round off answer to 2 decimal places)

Question a) Calculate the sales mix for the three products.

Question b) Calculate the weighted average contribution margin (WACM) for the company.

Question c) Calculate the number of units for each product line which need to be sold in order for the company to break even.

Question d) Explain THREE limitations that Accessories Ltd may encounter by using Cost Volume Profit Analysis (CVP)