Question

Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 21,200 portable grills, 47,700 stationary grills, and 5,300 smokers. Information on the three models is as follows:

	Portable	Stationary	Smokers
Price	$88	$201	$246
Variable cost
per unit	48	130	138

Total fixed cost is $1,904,700.

	Required:
1.	What is the sales mix of portable grills to stationary grills to smokers?
2.	Compute the break-even quantity of each product.
3.	Prepare an income statement for Texas-Q for the coming year. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. Enter the contribution margin ratio as a percentage rounded to two decimal places; round the break-even sales revenue to the nearest dollar.
4.	Compute the margin of safety for the coming year.

Answer 1

1.Computation of Sales as function of units Sold for three product						3(a)Computation of Sales as function of units Sold for three product
Particulars	Portable grills	Stationey Grill	Smoker	Total		Particulars	Portable grills		Stationey Grill		Smoker		Total
Units Sold	21200	47700	5300	74200			Per Unit	Total	Per Unit	Total	Per Unit	Total
Selling Price	$88.00	$201.00	$246.00			Units Sold	21200		47700		5300
Less: Variable Cost	$48.00	$130.00	$138.00			Sales	$88.00	$1,865,600	$201	$9,587,700	246	1303800	$12,757,100
Contribution	$40.00	$71.00	$108.00			Less: Variable Cost	$48.00	$1,017,600	$130	$6,201,000	138	731400	$7,950,000
Total Contribution	$848,000	$3,386,700	$572,400	$4,807,100		Contribution	$40.00	$848,000	$71	$3,386,700	108	572400	$4,807,100
Sales Mix %	18%	70%	12%			Less: Fixed Cost							1904700
						Net Income							$2,902,400
Computation of Weighted Average Contribution per Unit
Total Contribution		$4,807,100				3(b)Computation of Overall contribution margin Ratio
Unit Sold		74200				Sales		$12,757,100
Weighted Average Contribution		$64.79				Contribution		$4,807,100
(148544/2000)						Contribution Margin Ratio		38%
2. Computation of Breakeven sales						3(c). Computation of Breakeven sales
Fixed Cost		$1,904,700.00				Fixed Cost		$1,904,700
Weighted Average Contribution/Unit		64.79				Overall contribution		$4,807,100
Break even Sales ( in Units)		29,398.06				Sales Revenue		$12,757,100
						Breakeven sales revenue		$5,102,840
Computation of Sales Mis for models to achieve Brakeven						4) Margin of safety for coming year
Particular		Sales Mix%	Unit			Total Sales Revenue		$12,757,100
Prortable		18%	5292			Less: Breakeven sales revenue		$5,102,840
Stationery		70%	20579			Margin of Safety		$7,654,260
Smoker		12%	3528			Breakeven sales revenue		$3,061,704
Total			29398