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 40,000 ceiling fans and 60,000 table fans in the coming year. Product price and cost information includes:

	Ceiling Fan				Table Fan
Price		$64				$10
Unit variable cost		$8				$5
Direct fixed cost		$20,800				$47,000

Common fixed selling and administrative expenses total $96,000.

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 = fill in the blank 1e92cbfedf92029_1 : fill in the blank 1e92cbfedf92029_2

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	fill in the blank 1e92cbfedf92029_3
Break-even table fans	fill in the blank 1e92cbfedf92029_4

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
Sales	$fill in the blank f3074d003fa9011_2	$fill in the blank f3074d003fa9011_3	$fill in the blank f3074d003fa9011_4
Less: Variable expenses	fill in the blank f3074d003fa9011_6	fill in the blank f3074d003fa9011_7	fill in the blank f3074d003fa9011_8
Contribution margin	$fill in the blank f3074d003fa9011_10	$fill in the blank f3074d003fa9011_11	$fill in the blank f3074d003fa9011_12
Less: Direct fixed expenses	fill in the blank f3074d003fa9011_14	fill in the blank f3074d003fa9011_15	fill in the blank f3074d003fa9011_16
Product margin	$fill in the blank f3074d003fa9011_18	$fill in the blank f3074d003fa9011_19	$fill in the blank f3074d003fa9011_20
Less: Common fixed expenses			fill in the blank f3074d003fa9011_22
Operating income			$fill in the blank f3074d003fa9011_24

Answer 1

Requirement 1: Ratio of Sales mix of ceiling fans to table fans,

= 40,000:60,000= 2:3

Requirement 2: Calculation of break-even of ceiling fans and table fans:

	Ceiling Fans	Table Fans
Price per unit	$64	$10
Less:Variable Cost	$8	$5
Contribution Margin per unit	$56	$5
*Sales Mix	2	3
Total Contribution Margin per unit	112	15

	Round Of values		Without round off
Break Even ceiling fans	2*1290= 2,580	OR	2*1289.763=2579.52
Break Even table fans	3*1290=3,870	OR	3*1289.763=3,869.28

Working Notes:

1. Calculation of Total Break Even units= Total Fixed Costs/Contribution Margin

={$20,800+$47,000+$96,000}/ {112+15)

=1,289.763 (round off)= 1,290 units

Requirement 3:(a) If values are not rounded off:(2579.52 units and 3,869.28 units)

Vandenberg, Inc. Contribution-Margin-Income Statement For the Coming Year
	Ceiling Fans	Table Fans	Total
Sales	$165,089	$38,693	$203,782
Less: Variable expenses	$20,636	$19,346	$39,982
Contribution margin	$144,453	$19,347	$163,800
Less: Direct fixed expenses	$20,800	$47,000	$67,800
Product margin	$123,653	-$25,673	$96,000
Less: Common fixed expenses			$96,000
Operating income			$0

(b) If values are rounded off: (2,580 units and 3,870 units)

Vandenberg, Inc. Contribution-Margin-Income Statement For the Coming Year
	Ceiling Fans	Table Fans	Total
Sales	$165,120	$38,700	$203,820
Less: Variable expenses	$20,640	$19,350	$39,990
Contribution margin	$144,480	$19,350	$163,830
Less: Direct fixed expenses	$20,800	$47,000	$67,800
Product margin	$123,680	-$27,650	$96,030
Less: Common fixed expenses			$96,000
Operating income			-$30

If values are rounded off then there operating income shows the balance of -$30.