Wedding Productions provides wedding packages for discerning couples marrying on

Question

Wedding Productions provides wedding packages for discerning couples marrying on the beach at Gulf Shores, Alabama. The company's fixed costs are $48,000. The company has two wedding service packages that are all inclusive, the standard package and the deluxe package. Product Selling price per service Standard $2,000 Deluxe $4,000 Variable cost per service Standard $1,200 Deluxe $2,200 The company expects the sales mix to continue to be 60% standard wedding packages and 40% deluxe wedding packages. Required: Compute the following. Break even sales in units of each package. Break even sales in total dollars. Unit sales of each package required to earn operating income of $72,000. Total sales dollars required to earn operating income of $72,000. Contribution margin per unit of each package Weighted average contribution margin per unit Suppose the owner thinks an improvement in the economy will allow the company to sell more deluxe wedding packages this year, changing the sales mix to 40% 60%. Compute the following using this new scenario. Break even sales in units of each package. Break even sales in total dollars. Unit sales of each package required to earn operating income of $72,000. Total sales dollars required to earn operating income of $72,000. Contribution margin per unit of each package Weighted average contribution margin per unit Prepare a set of comparative income statements to prove your results.

Explanation / Answer

a. standard Deluxe

break even sale in units 48000 / (2000 - 1200) 48000 /(4000 - 2200)

= $48000 /$800 =$48000 / $1800

=60 units = 27 units

b. break even sale = $2000 * 60units = $4000* 27 units   

=$120000 =$108000

c. units sale with $72000 profit profit / contribution + break even   profit / contribution + break even

=72000 / 800 + 60 units =72000 / 1800 + 27 units

= 90 units + 60 units = 40units + 27 units

= 150 units = 67 units

d. sales value $72000 profit =150 units * sales = 67 units * sales

= 150 * $2000 =67 * $4000

= $300000 =$268000

e contribution margin $2000 -1200 / $2000 $4000-2200 / $4000

= 800 / 2000 = 1800 / 4000

= 40% =45%

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