Question

In: Accounting

Multiple-Product Analysis, Changes in Sales Mix, Sales to Earn Target Operating Income Basu Company produces two...

Multiple-Product Analysis, Changes in Sales Mix, Sales to Earn Target Operating Income

Basu Company produces two types of sleds for playing in the snow: basic sled and aerosled. The projected income for the coming year, segmented by product line, follows:

Basic Sled Aerosled Total
Sales $3,000,000 $2,400,000 $5,400,000
Total variable cost 1,000,000 1,000,000 2,000,000
Contribution margin $2,000,000 $1,400,000 $3,400,000
Direct fixed cost 778,000 650,000 1,428,000
Product margin $1,222,000 $750,000 $1,972,000
Common fixed cost 198,900
Operating income $1,773,100

The selling prices are $30 for the basic sled and $60 for the aerosled. (Round break-even packages and break-even units to the nearest whole unit.)

Required:

1. Compute the number of units of each product that must be sold for Basu to break even.

Basic ____ (in units)
Aero ____ (in units)

2. Assume that the marketing manager changes the sales mix of the two products so that the ratio is five basic sleds to three aerosleds. Compute the number of units of each product that must be sold for Basu to break even. Round your answers to the nearest whole number.

Basic ____ (in units)
Aero ____ (in units)

3. Conceptual Connection: Refer to the original data. Suppose that Basu can increase the sales of aerosleds with increased advertising. The extra advertising would cost an additional $195,000, and some of the potential purchasers of basic sleds would switch to aerosleds. In total, sales of aerosleds would increase by 12,000 units, and sales of basic sleds would decrease by 5,000 units. Would Basu be better off with this strategy? If so, give the amount of increase in income.
___ $

Solutions

Expert Solution

for formulas and calculations, refer to the image below -


Related Solutions

CVP Analysis and Sales Mix (Multiple Products). Sierra Books Incorporated produces two different products with the...
CVP Analysis and Sales Mix (Multiple Products). Sierra Books Incorporated produces two different products with the following monthly data (this is the base case). Text Lecture Notes Total Selling price per unit $100 $12 Variable cost per unit $60 $3 Expected unit sales 21,000 14,000 35,000 Sales mix 60 percent 40 percent 100 percent Fixed costs $750,000 Assume the sales mix remains the same at all levels of sales except for requirement i. Required: Round to the nearest unit of...
Changes in Sales Mix. Hi-Tech Incorporated produces two different products with the following monthly data (these...
Changes in Sales Mix. Hi-Tech Incorporated produces two different products with the following monthly data (these data are the same as the previous exercise). Cell GPS Total Selling price per unit $100 $400 Variable cost per unit $  40 $240 Expected unit sales 21,000 9,000 30,000 Sales mix 70 percent 30 percent 100 percent Fixed costs $1,800,000 Required: If the sales mix shifts to 50 percent Cell and 50 percent GPS, would the break-even point in units increase or decrease? Explain....
3. Sales mix and CVP Analysis: Goalie’s Ball, Inc. produces and sells two different types of...
3. Sales mix and CVP Analysis: Goalie’s Ball, Inc. produces and sells two different types of soccer goals: basic and premium. Monthly information regarding the two types of goals are shown below: Basic Premium Total Sales $ 1,080,000 $720,000 $1,800,000 Variable costs $315,400 $294,100 $609,500 Fixed expenses are $517,250 per month in total for the company. Determine the sales mix for the two products Determine the contribution margin ratio for each of the two products (round your decimal answer to...
Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and...
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 20,000 ceiling fans and 60,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $58 $16 Unit variable cost $9 $9 Direct fixed cost $21,000 $46,000 Common fixed selling and administrative expenses total $82,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest...
Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and...
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 40,000 ceiling fans and 60,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $64   $10   Unit variable cost $8   $5   Direct fixed cost $20,800   $47,000   Common fixed selling and administrative expenses total $96,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest...
Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and...
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 $58   $11   Unit variable cost $15   $6   Direct fixed cost $25,200   $43,000   Common fixed selling and administrative expenses total $70,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest...
Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and...
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 20,000 ceiling fans and 50,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price: $68 $10 Unit variable cost: $11 $7 Direct fixed cost: $22,200 $41,000 Common fixed selling and administrative expenses total $70,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest...
Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and...
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 $52   $17   Unit variable cost $15   $7   Direct fixed cost $22,600   $40,000   Common fixed selling and administrative expenses total $94,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest...
Multiple-Product Break-Even and Target Profit Vandenberg, Inc., produces and sells two products: a ceiling fan and...
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...
Does Target retail company product mix make sense from a product manager's perspective?
Does Target retail company product mix make sense from a product manager's perspective?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT