Mulipile Product CVP analysis; sensitivity analysis Hartford publishing company

Question

Mulipile Product CVP analysis; sensitivity analysis

Hartford publishing company (HPC) specializes in international business news publications. Its prinicaipal product is HPC monthly, which is mailed to subscribers the first week of each month. A weekley version , called HPC weekely is also available to subscribers over the web for higher cost. 60% of HPC subscribers are non-domestic customers . The company experienced a fast growth in subscribers in the last few years of operations, but sales have begun to to slow in recent years as new competitors have entered the market. HPC has the following cost structure and sales revenue for its subsricption operations on a yearly basis. All costs and all supscriptions are in U.S. dollars.

Fixed Costs $378,000 per year

Variable Costs:

Mailing .70 pre issue

Commission 3.50 per subsription

Admin 2.00 per subsribtion

Sales Mix Information based on the number of subsriptions

HPC weekly 25%

HPC monthly 75%

Selling Price

HPC Weekly $52 per subscription

HPC Monthly $20 per subscription

Required :

1. determine the Contribution margin per unit for weekley and monthly subscription?

2. Determine contribution margin ratio for weekly and monthly subscription ?

3 . a. Determine HPC breakeven in sales units and sales dollars, Use the weighted avg contribution margin approach and show calculations. Hint: when calculating the weighted avg contribution margin per unit, the weights in the calculations are based on relative units sold and when calculating the weighted avg for contribution margin ratio, the weights are based on relative sales dollars, not units.

b. at the overall breakevenpoint in units, what is the breakeven amount in units for each individual product?

c.What is the breakeven amount in sales dollars for each product?

4. Prepare data table for for the breakeven volume and % change in the breakeven point from requirement 3 for 1% absolute changes in sales mix for HPC weekly over the range 20% to 30%

5. What sales level in total units at the assumed sales mix us required to reach a before tax profit of $75,000?

6.Given the assumed sales mix, what sales volume in total units is required to generate an after tax profit , equal to 10% of sales dollars? Show calculations

Thanks

Explanation / Answer

1. contribution margin per unit

total variable cost per unit

Mailing =.70 pre issue

Commission= 3.50 per subsription

Admin = 2.00 per subsribtion

$6.2

weekly contrbution margin

= 52 - 6.2 (25 / 100)

= 52 - 1.55

= $50.45 per subscription

monthly contrbution margin

= 20 - 6.2 (75 / 100)

= 20 - 4.65

= $15.35 per subscription

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