Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sel
ID: 2513335 • 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 70,000 table fans in the coming year. Product price and cost information includes:
Common fixed selling and administrative expenses total $94,000.
Required:
1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)?
Sales mix of ceiling fans to table fans = :
2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number.
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 $12,000? 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 $12,000.) Round your intermediate calculations and final answers to nearest number.
Ceiling Fan Table Fan Price $52 $17 Unit variable cost $15 $7 Direct fixed cost $22,600 $40,000Explanation / Answer
Req 1: Sales mix of ceiling fans to Table fans: 30,000 celing fans : 70,000 Table fans i.e. 3 :7 Req 2: Total fixed cost: 22600+40000+94000 =156,600 The Contirbution margin per Sales mix Ceiling Table Total Selling price 52 17 Less: Vraible cost 15 7 Conttribution margin per unit 37 10 Sales mix 3 7 Contribution margin per sales mix 111 70 181 Break even in sales mix: Fixed cost / Contribution per mix = $ 156600 /181= 866 sales mix Number of units of Celing fans (866*3): 2598 units Number of Units of table fans (866*7): 6062 units Req 3: Contribution margin income statement: Ceiling Table Total Sales revenue 135096 103054 238150 Less: variable cost 38970 42434 81404 Contribution margin 96126 60620 156746 Less; Fixed cost Direct fixed cost 22600 40000 62600 Common 94000 Net income 146 Req 4: Desired contirbution: 156600+12000 = $ 168,600 Target sales in units = Desired contribution/ Contribution per sales mix 931.4917 168600 /181 = 932 sales mix Number of ceiling fans: 932 *3 = 2796 units Number of table fans= 932 *7 = 6524 units
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