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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.

  1. Determine the sales mix for the two products
  2. 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%)
  3. Calculate the weighted average contribution margin (WACM) ratio (round your decimal answer to four decimal places, i.e. 0.3149322 = 0.3149 = 31.49%)
  4. Calculate Goalie’s Ball’s break-even point in dollars. Round to the nearest cent (i.e. two decimal places)
  5. 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

ekkarill92 answered 1 year ago
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