CD6 EXCEL Tutorial CURRENT DESIGNS Current Designs manufactures two different ty

Question

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 $570 $1,340 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.) (a) Determine the weighted-average unit contribution margin for Current Designs. Rotomolded Kayaks Composite Kayaks Sales price/unit Value Value Variable costs/unit Value Value Unit Contribution margin (UCM) ? ? Product mix Value Value Weighted Average UCM ? + ? ? (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.) Fixed costs Value Weighted Average UCM Value Breakeven units ? Rotomolded Kayaks Composite Kayaks Breakeven unit distribution ? ? (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.) Target net income in units: Rotomolded Kayaks Composite Kayaks Sales price/unit Value Value Variable costs/unit Value Value Unit Contribution margin (UCM) ? ? Product mix Value Value Weighted Average UCM ? + ? ? Required sales in units:      Total fixed costs Value Value      Target net income Value Value      Total required sales (dollars) ? ?      Weighted Average UCM ? ?      Required sales in units ? ? (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. Rotomolded Kayaks Composite Kayaks Sales Value Value Variable Costs Value Value Contribution Margin ? ? Fixed Costs Value Value Net Income ? ? (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.) Rotomolded Kayaks Composite Kayaks Contribution Margin (a) Value Value Net Income (b) Value Value Degree of Operating Leverage (a ÷ b) ? ? After you have completed CD6, consider the following additional question. 1. Assume that variable cost per unit for the rotomolded kayak and composite kayak changed to $610 and $1,400 respectively. Show impact of these changes on each of the scenarios provided. 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 $570 $1,340 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.) (a) Determine the weighted-average unit contribution margin for Current Designs. Rotomolded Kayaks Composite Kayaks Sales price/unit Value Value Variable costs/unit Value Value Unit Contribution margin (UCM) ? ? Product mix Value Value Weighted Average UCM ? + ? ? (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.) Fixed costs Value Weighted Average UCM Value Breakeven units ? Rotomolded Kayaks Composite Kayaks Breakeven unit distribution ? ? (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.) Target net income in units: Rotomolded Kayaks Composite Kayaks Sales price/unit Value Value Variable costs/unit Value Value Unit Contribution margin (UCM) ? ? Product mix Value Value Weighted Average UCM ? + ? ? Required sales in units:      Total fixed costs Value Value      Target net income Value Value      Total required sales (dollars) ? ?      Weighted Average UCM ? ?      Required sales in units ? ? (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. Rotomolded Kayaks Composite Kayaks Sales Value Value Variable Costs Value Value Contribution Margin ? ? Fixed Costs Value Value Net Income ? ? (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.) Rotomolded Kayaks Composite Kayaks Contribution Margin (a) Value Value Net Income (b) Value Value Degree of Operating Leverage (a ÷ b) ? ? After you have completed CD6, consider the following additional question. 1. Assume that variable cost per unit for the rotomolded kayak and composite kayak changed to $610 and $1,400 respectively. Show impact of these changes on each of the scenarios provided.

Explanation / Answer

a)

b). Fixed Cost = $820000

WAUCM = $436

Breakeven units = 820000/436

= 1881

Rotomolded Kayaks = 1881 x 80% = 1505 units

Composite kayaks = 1881 x 20% = 376

c).

Fixed cost = 820000

Net Income = 2000000

Total no. of units to be sold = 2820000/464 = 6078

Rotomold = 6078 x 70% = 4255

Composite = 6078 x 30% = 1823

d).

* Variable cost of Rotomolded = 2000000/950 x 570 = 1200000

Variable cost of Composite = 1000000/2000 x 1340 = 670000

Rotomolded Kayaks Composite Kayaks Selling price per unit 950 2000 Variable cost per unit 570 1340 Contribution per unit 380 660 Product Mix 80% 20% Weighted Average UCM 304 132 436

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.