How many units of Slava and Zirkova must be sold to reach a target net income of

Question

How many units of Slava and Zirkova must be sold to reach a target net income of 150,000. They are not sure how to calculate this because most of their fixed costs relate to both products.

Year Ended December 31, 20x2 es Cost of goods sold Gross margin $720,000 312,000 408,000 Operating expenses Accounting and legal Advertising and promotion Bank charges Commissions Consulting Depreciation nsurance Interest Office and general administration Rent Salaries and benefits Travel and vehicle Utilities Taxes and duties Total operating expenses 23,600 70,000 3,400 40 10 24 43 95 45 393 Income $15,000 Notes: 10% of cost of goods sold includes fixed manufacturing overhead. All operating expenses are fixed except commissions. $35,000 of commissions relates to Slava and $5,000 relates to Zirkova. The 20X2 sales revenue represented sales of $400,000 for Slava and $320,000 for Zirk Slava sells for $10 per bottle and Zirkova sells for $4 per bottle. These are sales to the various liquor boards in each province. For example, in Ontario, sales are to the LCBO, which then marks up the product for sale to the consumer in retail outlets.

Explanation / Answer

Workings:

Checking:

The results for the year 20X2 Total Slava Zirkova Amount % Amount % Sales 720000 400000 320000 Variable cost of goods sold Note 1 280800 39.00% 156000 39.00% 124800 39.00% Gross contribution margin 439200 244000 195200 Variable operating costs: Commisions 40000 35000 8.75% 5000 1.56% Contribution margin 399200 209000 190200 Contrubition margin ratio 55.44% 52.25% 59.44% Fixed Costs Fixed cost of goods sold 31200 Acounting fee 23600 13111 10489 Advertising charges 70000 38889 31111 Bank charges 3400 1889 1511 Consulting 11000 6111 4889 Depreciation 10000 5556 4444 Insurance 9000 5000 4000 Interest 6000 1300 4700 General administration 24000 13333 10667 Rent 43000 23889 19111 Salaries and benefits 95000 52778 42222 Travel and vehicle 45000 25000 20000 Utilities 5000 2778 2222 Taxes and duties 8000 4444 3556 Total fixed costs 384200 194077.8 158922.2 Net income 15000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

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