Question

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 whole number for each product)?
Sales mix of ceiling fans to table fans =  :

2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number.

Break-even ceiling fans
Break-even table fans

3. Prepare a contribution-margin-based income statement for Vandenberg, Inc., based on the unit sales calculated in Requirement 2. If an amount is zero, enter "0". Enter any negative product margin and losses with a minus sign. Do not round intermediate calculations. Round your final answers to nearest dollar.

Vandenberg, Inc.
Contribution-Margin-Income Statement
For the Coming Year
	Ceiling Fans	Table Fans	Total
	$	$	$
	$	$	$
	$	$	$
			$

4. What if Vandenberg, Inc., wanted to earn operating income equal to $12,000? Calculate the number of ceiling fans and table fans that must be sold to earn this level of operating income. (Hint: Remember to form a package of ceiling fans and table fans based on the sales mix and to first calculate the number of packages to earn an operating income of $12,000.) Round your intermediate calculations and final answers to nearest number.

Break-even ceiling fans
Break-even table fans

Answer 1

Req 1:
Sales mix of ceiling fans to Table fans:   30,000 celing fans : 70,000 Table fans i.e. 3 :7
Req 2: Total fixed cost: 22600+40000+94000 =156,600
The Contirbution margin per Sales mix
			Ceiling	Table	Total
Selling price			52	17
Less: Vraible cost			15	7
Conttribution margin per unit			37	10
Sales mix			3	7
Contribution margin per sales mix			111	70	181
Break even in sales mix: Fixed cost / Contribution per mix = $ 156600 /181= 866 sales mix
Number of units of Celing fans (866*3): 2598 units
Number of Units of table fans (866*7): 6062 units
Req 3:
Contribution margin income statement:
			Ceiling	Table	Total
Sales revenue			135096	103054	238150
Less: variable cost			38970	42434	81404
Contribution margin			96126	60620	156746
Less; Fixed cost
Direct fixed cost			22600	40000	62600
Common					94000
Net income					146
Req 4:
Desired contirbution: 156600+12000 = $ 168,600
Target sales in units = Desired contribution/ Contribution per sales mix
931.4917		168600 /181 = 932 sales mix
Number of ceiling fans: 932 *3 = 2796 units
Number of table fans= 932 *7 = 6524 units