Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sel
ID: 2532156 • 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: Ceiling Fan Table Fan Price $60 $15 Unit variable cost $12 $7 Direct fixed cost $23,600 $45,000 Common fixed selling and administrative expenses total $85,000.
Required:
1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)?
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?
3. Prepare a contribution-margin-based income statement for Vandenberg, Inc., based on the unit sales calculated in Requirement 2.
4. What if Vandenberg, Inc., wanted to earn operating income equal to $14,400? 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 $14,400.)
Show computation please.
Explanation / Answer
SOLUTION
(A) Sales mix of ceiling fans to table fans = 30,000:70,000 = 3:7
(B)
Breakeven packages = Total fixed cost / Package contribution margin
= ($23,600 + $45,000 + $85,000) / $200
= $153,600 / $200
= 768 packages
Break -even ceiling fans = (3 * 768) = 2,304
Break-even table fans = (7 * 768) = 5,376
(C)
Vandenberg, Inc
Contribution-Margin-Income Statement
(D) Package contribution margin is the same as that figured in Requirement 2.
Packages = (Total fixed cost + Target profit) / Package contribution margin
= ($23,600 + $45,000 + $85,000 + $14,400) / $200
= $168,000 / $200
= 840 packages
Break-even ceiling fans = (3 * 840) = 2,520
Break-even table fans = (7 * 840) = 5,880
Product Price (A) Unit variable cost (B) Unit contribution margin (C=A-B) Sales mix (D) Package unit contribution margin (C*D) Ceiling fan $60 $12 $48 3 $144 Table fan $15 $7 $8 7 $56 Package total $200Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.