Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sel
ID: 2415634 • Letter: M
Question
Multiple-Product Break-Even and Target Profit
Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 30,000 ceiling fans and 90,000 table fans in the coming year. Product price and cost information includes:
Common fixed selling and administrative expenses total $80,000.
3. Prepare a contribution-margin-based income statement for Vandenberg, Inc., based on the unit sales calculated in Requirement 2. If an amount is zero, enter "0". Enter any negative product margin and losses with a minus sign. Do not round intermediate calculations. Round your final answers to nearest dollar.
4. What if Vandenberg, Inc., wanted to earn operating income equal to $14,400? Calculate the number of ceiling fans and table fans that must be sold to earn this level of operating income. (Hint: Remember to form a package of ceiling fans and table fans based on the sales mix and to first calculate the number of packages to earn an operating income of $14,400.) Round your intermediate calculations and final answers to nearest number.
Ceiling Fan Table Fan Price $50 $11 Unit variable cost $11 $4 Direct fixed cost $20,800 $46,000Explanation / Answer
Solution:
3. Prepare a contribution-margin-based income statement for Vandenberg, Inc., based on the unit sales calculated in Requirement 2. If an amount is zero, enter "0". Enter any negative product margin and losses with a minus sign. Do not round intermediate calculations. Round your final answers to nearest dollar. Vandenberg plans to sell 30,000 ceiling fans and 90,000 table fans in the coming year. Ceiling Fan Table Fan Price $50 $11 Unit variable cost $11 $4 Direct fixed cost $20,800 $46,000 Sales mix of ceiling fans to table fans = 30,000:90,000 = 3:9 Common fixed selling and administrative expenses total $80,000. Product Price Unit variable cost Unit Contribution Margin Sales Mix Package Unit Contribution Margin = Unit variable cost x unit contribution margin Ceiling Fans $50 $11 39 3 117 Table Fans $11 $4 7 9 63 Package total $ 180 Found by multiplying the number of units in the package (3) by the unit contribution margin ($39). Found by multiplying the number of units in the package (9) by the unit contribution margin ($7). Break-even packages = Total fixed cost/Package contribution margin ($20,800 + $46,000 + $80,000)/$180 ($1,46,800)/$180 = 816 packages Break-even ceiling fans = (3 × 816) = 2,448 Break-even table fans = (9 × 816) = 7,344 Vandenberg, Inc. Contribution-Margin-Income Statement For the Coming Year Ceiling Fans Table Fans Total Sales 2,448 x $50 7,344 x $11 $122,400 $80,784 $203,184 Less: Variable expenses 2,448 x $11 7,344 x $4 $26,928 $29,376 $56,304 Contribution margin $95,472 $51,408 $146,880 Less: Direct fixed expenses $20,800 $46,000 $66,800 Product margin $74,672 $5,408 $80,080 Less: Common fixed expenses $80,000 Operating income $80 4. What if Vandenberg, Inc., wanted to earn operating income equal to $14,400? Calculate the number of ceiling fans and table fans that must be sold to earn this level of operating income. (Hint: Remember to form a package of ceiling fans and table fans based on the sales mix and to first calculate the number of packages to earn an operating income of $14,400.) Round your intermediate calculations and final answers to nearest number. Package contribution margin is the same as that figured in above. Packages = (Total fixed cost + Target profit)/Package contribution margin ($20,800 + $46,000 + $80,000 + $14,400)/$180 ($1,61,200)/$180 = 896 packages Break-even ceiling fans = (3 × 896) = 2,688 Break-even table fans = (9 × 896) = 8,064Related Questions
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