CD6 EXCEL Tutorial CURRENT DESIGNS Current Designs manufactures two different ty

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CD6 EXCEL Tutorial CURRENT DESIGNS      Current Designs manufactures two different types of kayak, rotomolded kayaks and composite kayaks. The following information is available for each product line. Rotomolded Composite Sales price/unit $950 $2,000 Variable costs/unit $610 $1,400 The company's fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks make up 80% of the total units sold. Instructions (a) Determine the weighted-average unit contribution margin for Current Designs. (b) Determine the break-even points in units for Current Designs and identify how many units of each type of kayak will be sold at the break-even point. (Round to the nearest whole number.) (c ) Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold. Calculate the total number of units that would need to be sold to earn a net income of $2,000,000 and identify how many units of each type of kayak will be sold at this level of income. (Round to the nearest whole number.) (d) Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP income statement for each product line. (e ) Using the information in part (d), calculate the degree of operating leverage for each product line and interpret your findings. (Round to two decimal places.) CD6 EXCEL Tutorial CURRENT DESIGNS      Current Designs manufactures two different types of kayak, rotomolded kayaks and composite kayaks. The following information is available for each product line. Rotomolded Composite Sales price/unit $950 $2,000 Variable costs/unit $610 $1,400 The company's fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks make up 80% of the total units sold. Instructions (a) Determine the weighted-average unit contribution margin for Current Designs. (b) Determine the break-even points in units for Current Designs and identify how many units of each type of kayak will be sold at the break-even point. (Round to the nearest whole number.) (c ) Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold. Calculate the total number of units that would need to be sold to earn a net income of $2,000,000 and identify how many units of each type of kayak will be sold at this level of income. (Round to the nearest whole number.) (d) Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP income statement for each product line. (e ) Using the information in part (d), calculate the degree of operating leverage for each product line and interpret your findings. (Round to two decimal places.)

Explanation / Answer

Sales mix 80% 20% Rotomolded Composite Sales price/unit $ 950 $ 2,000 Variable costs/unit $ 610 $ 1,400 Contribution/unit $ 340 $ 600 weighted average contribution(80:20) $ 272 $ 120 $ 392 weighted average contribution(70:30) $ 238 $ 180 $ 418 The company's fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks make up 80% of the total units sold. b Break even Point = Fixed Cost/Contribution per unit(Weighted) 820000/392 2092 Rotomolded Composite 1674 418 c sales mix changes to 70:30 Break even Point for 2000000 = Fixed Cost+2000000/Contribution per unit(Weighted) (820000+2000000)/418 6746.411483 6746 Rotomolded Composite 4722 2024 d Rotomolded Composite CVP Income sales 2000000 1000000 Rotomolded Composite units sold at 2000000/950 1000000/2000 2000000 1000000 sales 2105.263158 500 1284210.53 700000 variable cost variable cost $ 610 $ 1,400 715789.47 300000 contribution $ 1,284,210.53 $ 700,000 660000 160000 fixed cost 55789.47 140000.00 profit e degree of operating leverage (sales-vc)/(sales-vc-fc) Rotomolded Composite (2000000-1284210.53)/(2000000-1284210.53-660000) (1000000-700000)/(1000000-700000-160000) degree of op lev 12.83018946 2.14285714

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