By using the Example Giving Below, KO Company has determined that the selling pr
ID: 2375356 • Letter: B
Question
By using the Example Giving Below, KO Company has determined that the selling price for its Deluxe cutlery products should be raised to $30, and the Standard cutlery products should be raised to $20. Using Excel, determine the new variable costs per unit and unit CM. Fixed costs remain unchanged. Complete:
Step1: Compute the package contribution margin (CM).
Step 2: Multiply this number by their respective mix units.
Example to work with:
Assuming that KO Company makes a deluxe cutlery set and a standard set that have these unit CM data:
Deluxe
Standard
Selling price
$15
$10
Variable cost per unit
12
5
Unit
$3
$5
Sales mix
60%
40%
(based on sales volume)
$76,000
Fixed costs
Note: The alternative is to build a package containing 3 deluxe models and 2 standard models (3:2 ratio). By defining the products as a package, the multiple-product problem is converted into a single-product one. Then follow next 2 steps:
Step1: compute the package CM
Deluxe
Standard
Selling price
$15
$10
Variable cost per unit
$12
$5
Unit CM
$3
$5
Sales mix
3
2
Package CM
$9
$10
$19 package total
$76,000/$19 per package=4000 packages
Step2: Multiply this number by their respective mix units:
Deluxe: 4,000 packages *3 units=12,000 units
Standard: 4,000 packages * 2units=8,000 units
-----------------
20,000 units
NOTE: this question can be TRICKY, you must go through the Example Thoroughly! This question requires you to pour over the material in such a way that you Master the Example.
The book I am using for this homework is "Budgeting Basics and Beyond". ISBN: 978-1118-096277
Pls show your work in detail. Thank you!!
Deluxe
Standard
Selling price
$15
$10
Variable cost per unit
12
5
Unit
$3
$5
Sales mix
60%
40%
(based on sales volume)
$76,000
Fixed costs
Explanation / Answer
deluxe standard selling price 30 20 variable cost 24 10 unit 6 10 sales mix 60% 40% f.c 76000 step 1 deluxe standard selling price 30 20 variable cost 24 10 unit CM 6 10 sales mix 3 2 package CM 18 20 package total 38 76000/38 = 2000 packges step 2 Deluxe 2000*3 6000 Standard 2000*2 4000 10000
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