Question

In: Accounting

Contact WheelsLtd manufactures and sells car tyres. It has developed two new models, ‘Z-Grip’ and ‘Y-Slip’,...

Contact WheelsLtd manufactures and sells car tyres. It has developed two new models, ‘Z-Grip’ and ‘Y-Slip’, for use in long distance driving which will be launched in January 2021.These will be sold exclusively in the company’s new car-mart. The annual fixed cost is $180,000. From a pre-launch market survey, it expects that sixty percent of the potential customers prefer ‘Z-Grip’ while forty percent prefer ‘’Y-Slip’. The following information has been extracted to facilitate a Cost-Volume-Profit analysis:

Z-Grip

Y-Slip

Selling Price per tyre

$300

$400

Variable Cost per tyre

$80

$120

Sales commission per unit

$20

$30

Required:

  1. Calculate the Unit contribution margin for each model of the tyres.
  2. Calculate the weighted average contribution margin, assuming the sales mix as determined from the survey is expected to remain constant
  3. Calculate the break-even point in units and in sales dollars (in total and per product) for Contact Wheels Ltd’s new car-mart. Assume a constant sales mix.
  4. How many tyres of each modelneedto be sold to earn a target net profit of $66,000? Assume a constant sales mix.
  5. Identify any two factors that may affect a cost-volume-profit analysis

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Contact WheelsLtd manufactures and sells car tyres. It has developed two new models, ‘Z-Grip’ and ‘Y-Slip’,...
Contact WheelsLtd manufactures and sells car tyres. It has developed two new models, ‘Z-Grip’ and ‘Y-Slip’, for use in long distance driving which will be launched in January 2021.These will be sold exclusively in the company’s new car-mart. The annual fixed cost is $180,000. From a pre-launch market survey, it expects that sixty percent of the potential customers prefer ‘Z-Grip’ while forty percent prefer ‘’Y-Slip’. The following information has been extracted to facilitate a Cost-Volume-Profit analysis: Z-Grip Y-Slip Selling Price...
Black Tyres (BT) manufactures and sells two products in Australia: low-budget tyres and high performance tyres....
Black Tyres (BT) manufactures and sells two products in Australia: low-budget tyres and high performance tyres. Low-budget tyres are made from hard rubber for durability while high performance tyres are made from softer rubber for superior grip in wet conditions. When the low-budget model was introduced in the market, another competitor from India introduced low priced tyres with almost alike features. Due to this, the Sales Director decides to reduce the price of low-budget tyres so that sales do not...
Car Phones, Inc., sells two models of car telephones: model X and model Y. Records show...
Car Phones, Inc., sells two models of car telephones: model X and model Y. Records show that 3 hours of sales time are used for each model X telephone that is sold and 5 hours of sales time for each model Y telephone. A total of 600 hours of sales time is available for the next 4 week period. In addition, management planning policies call for minimum sales goals of 25 units for both model X and model Y. The...
Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,600, and a new...
Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Assign overhead to products using ABC and evaluate decision. Traditional Costing Royale Majestic Direct materials $  700 $420 Direct labor ($20 per hour)    120  100 Manufacturing overhead ($38 per DLH)    228  190 Total per unit cost $1,048 $710 In 2020,...
Go Camera manufactures and sells two types of cameras for cars and drones. These two models...
Go Camera manufactures and sells two types of cameras for cars and drones. These two models are manufactured in separate facilities and each facility is treated as profit center. Go Camera serves as a supplier to car manufacturers as well as drone manufacturers. The following table provides cost and price information for each model: Car Camera Drone Camera Selling Price $70 $100 Variable Cost $30 $35 Fixed Cost $300,000 $ 600,000 Go Camera has a marketing department with cost $400,000...
Kima Company manufactures and sells two models of a home appliance. The Standard model is a...
Kima Company manufactures and sells two models of a home appliance. The Standard model is a basic appliance with mostly manual features, while the Galaxy model is highly automated. The appliances are produced to order, and there are no inventories at the end of the year. The cost accounting system at Kima allocates overhead to products based on direct labor cost. Overhead in year 1, which just ended, was $3,342,250. Other data for year 1 for the two products follow:...
Kima Company manufactures and sells two models of a home appliance. The Standard model is a...
Kima Company manufactures and sells two models of a home appliance. The Standard model is a basic appliance with mostly manual features, while the Galaxy model is highly automated. The appliances are produced to order, and there are no inventories at the end of the year. The cost accounting system at Kima allocates overhead to products based on direct labor cost. Overhead in year 1, which just ended, was $2,933,000. Other data for year 1 for the two products follow:...
A race car company  developed a new car battery that has a longer life span than that...
A race car company  developed a new car battery that has a longer life span than that of a traditional battery. From the date of purchase of a race car, the distribution of the life span of the new battery is approximately normal with mean 30 months and standard deviation 8 months. For the price of $50, the company offers a two-year warranty on the new battery for customers who purchase a race car. The warranty guarantees that the car will...
Suppose you are in the market for a new car. You identify two models that you...
Suppose you are in the market for a new car. You identify two models that you like and are considering a final purchase decision. The vehicle details are as follows: One is a high fuel efficient vehicle with a fuel cost per mile of $0.10 and the other is a low fuel efficient vehicle with a fuel cost per mile of $0.15. The high efficiency vehicle costs $47,500 in time period 0 (no discounting); the low efficiency vehicle costs $32,500...
Xavier Sound Industries manufactures and sells two models of headphones, Regular and Classic. It expects to...
Xavier Sound Industries manufactures and sells two models of headphones, Regular and Classic. It expects to sell 6,000 units of Regular and 2,000 units of Classic in 2021.The following estimates are given for 2021:                                                    Regular                   Classic Selling price                           Rs. 1000          Rs. 1500 Xavier had an inventory of 400 units of Regular and 150 units of Classic at the end of 2020. It has decided that as a measure to counter stock outages it will maintain ending inventory...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT