Question

fORD sells cars and have the following product lines – Sedans, Sports Utilities Vehicles (SUV) and Family Vans. For its January 2020 operations, the following were made available for management analysis.

Sedan SUVs Family Vans

Selling Price ¥1,000,000 ¥2,000,000 ¥2,200,000

Variable Manufacturing Costs per unit 400,000 900,000 1,100,000

Sales Volume (units) 150 200 50

Fixed manufacturing overhead costs total ¥275,000,000 and fixed administrative expenses total ¥25,000,000. FORD gives a 5% commission on sales (variable selling expense to its car sales people).

1. Compute the Weighted Contribution Margin per unit.

2. Compute the Weighted Contribution Margin ratio.

3. Break-even point in total units.

4. Break-even point in total sales (¥)

5. Net operating income (loss) under Variable Costing Method

6. Target sales in total ¥ to earn ¥100,000.

7. Following no.6 question above, how much should SUVs business segment contribute to sales? Problem 2

8. Cost Volume Profit Analysis. Assume that actual sales volume of FORD (Problem 1) for February 2020 were as follows: Sedan 200; SUVs 140, Family Van 50. Assuming there is no change in selling price and the cost structure (variable and fixed), compute the net operating income under variable costing method.

9. The marketing manager believes that financial performance for March 2020 could be improved with his proposal of 12% selling price increase with a corresponding 10% decrease in volume across all products lines. Compute the projected net operating income for March 2020 using figures from February 2020.

10. Following question number 9 , compute the break-even point in units under this scenario.

11. Thinking that customers are price sensitive, management is considering to decrease the selling price by 10% in the hope of a 10% increase in sales volume. Assume this scenario is independent of the marketing manager’s proposal and base your March 2020 computations on the February 2020 results (see no. 8).

12. Following question number 11, compute the break-even point in total sales (¥).

Answer 1