Question
In: Accounting
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 four decimal places, i.e. 0.3149322 = 0.3149 = 31.49%)
- Calculate the weighted average contribution margin (WACM) ratio (round your decimal answer to four decimal places, i.e. 0.3149322 = 0.3149 = 31.49%)
- Calculate Goalie’s Ball’s break-even point in dollars. Round to the nearest cent (i.e. two decimal places)
- The manager of Goalie’s Ball is considering a shift in sales mix, increasing sales of basic goals to 65% and decreasing sales of premium goals to 35%. How would this affect the break-even point in dollars? Briefly explain your answer.
Solutions
Expert Solution
Part-1
| Computation of Sales Mix | |||
| Basic | Premium | Total | |
| Sales | 1080000 | 720000 | 1800000 |
| Sales Mix | 0.6 | 0.4 | |
| (1080000/1800000) | (720000/1800000) | ||
Part-2
| Computation of Contribution margin Ratio | |||
| Basic | Premium | Total | |
| Sales (a) | 1080000 | 720000 | 1800000 |
| Less: Variable cost | 315400 | 294100 | 609500 |
| Contribution ( C) | 764600 | 425900 | 1190500 |
| CM Ratio(c/a) | 70.80% | 59.15% | 66.14% |
Part-3
| -Computation of Weighted Average Contribution ratio | |||
| Basic | Premium | Total | |
| Sales (a) | 1080000 | 720000 | 1800000 |
| Contribution ( C) | 764600 | 425900 | 1190500 |
| Sales Mix | 0.6 | 0.4 | |
| Weighted Average Contribution | 458760 | 170360 | 629120 |
| Weighted Average Contribution margin Ratio:- 629120/1800000=34.95% | |||
| d) Commputation BEP in Dollar |
| BEP= Fixed Cost/ Weighted CM Ratio |
| 517250/34.95%= $1479924 |
| BEP for Basic= $1479924X60%=$887954 |
| BEP for Premium= $1479924X40%=$591970 |
| e:-Computation of Weighted Avergae Contribution ratio | |||
| Basic | Premium | Total | |
| Contribution ( C) | 764600 | 425900 | 1190500 |
| Sales Mix (d) | 0.65 | 0.35 | |
| Weighted
Averge Contribution (cXd) |
496990 | 149065 | 646055 |
| Weighted Average Contribution margin Ratio:- 646055/1800000=35.89% | |||
| Commputation BEP in Dollar | |||
| BEP= Fixed Cost/ Weighted CM Ratio | |||
| 517250/35.89%= $1441209 | |||
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