Question

In: Accounting

1. Glacial Springs produces and sells water filtration systems for homeowners. Information regarding its three models...

1. Glacial Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below.

	Basic	Basic Plus	Premium	Total
Units sold	540	300	360	1,200
Selling price	$240	$435	$755
Variable cost	$185	$270	$430

3. The Richibouctou Inn is trying to determine its break-even point. The inn has 71 rooms available that are rented at $60 a night. Operating costs are as follows:

Salaries	$9,240	per month	Maintenance	$480	per month
Utilities	$1,930	per month	Housekeeping service	$6	per room
Depreciation	$1,310	per month	Other costs	$24	per room

Determine the inn’s break-even point in the number of rented rooms per month and dollars.

If the inn plans on renting 32 rooms per day (assuming a 30-day month), what is the monthly margin of safety in dollars and the margin of safety ratio?

The company’s total fixed costs to produce the filtration systems are $199,470.

Determine the sales mix as a function of units sold for the three products.

	Sales mix
Basic		%
Basic Plus		%
Premium

Determine the weighted-average unit contribution margin. (Round answer to 2 decimal places, e.g. 15.25.

Determine the total number of units that the company must sell to break even.

Determine the number of units of each model that the company must sell to break even.

2. Determine the missing amounts:

	Unit Selling Price	Unit Variable Costs	Contribution Margin per Unit	Contribution Margin Ratio
1.	$850	$595	$	%
2.	$450	$	$225	%
3.	$	$	$430	25%

Solutions

Expert Solution

1. Sales Mix

Total Units Sold = 1,200

Sales Mix for Basic = 540/1,200

=45%

Sales Mix for Basic plus = 300/1,200

=25%

Sales Mix for Premium = 360/1,200

=30%

	Basic	Basic Plus	Premium	Total
Sales	240.00	435.00	755.00	1,430.00
Variable Cost	185.00	270.00	430.00	885.00
Contribution	55.00	165.00	325.00	545.00
Sales Mix	45%	25%	30%
Weighted Average Contribution Margin	24.75	41.25	97.50	163.50

Fixed Cost = 199,470

Break-even point in units = 199,470/163.50

=1,220 Units

4. Basic = 1,220 x 45% = 549 Units

Basic Plus = 1,220 x 25% = 305 Units

Premium = 1,220 x 30% = 366 Units

	Unit Selling Price	Variable cost	Contribution Margin	Contribution Margin ratio
1	850.00	595.00	255.00	30%
2	450.00	225.00	225.00	50%
3	1,720.00	1,290.00	430.00	25%

ekkarill92 answered 1 year ago

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