Question
In: Accounting
Dunphy Inc. produces three models of a certain product: Standard, Deluxe, and Super. Relevant data: Standard...
| Dunphy Inc. produces three models of a certain product: Standard, Deluxe, and Super. Relevant data: | |||||||||||||
| Standard | Deluxe | Super | |||||||||||
| Sales in units | 12,000 | 5,000 | 3,000 | ||||||||||
| Price per unit | 85 | 120 | 166 | ||||||||||
| Variable cost per unit | 34 | 45 | 84 | ||||||||||
| Fixed costs are $1,000,000. | |||||||||||||
| a) | Compute Dunphy's breakeven point in sales dollars with the current sales mix. | ||||||||||||
| b) | Compute Dunphy's current margin of safety. | ||||||||||||
| c) | What is forecast net income at sales of $2,400,000 given the current sales mix? | ||||||||||||
| d) | Marketing Department has proposed a sales promotion costing $40,000 with a focus on one model only. | ||||||||||||
| Depending on which model is chosen, the promotion is expected to increase sales of Standard by 11%, Deluxe by 15%, or Super by 20%. | |||||||||||||
| Should the campaign be approved, and if so, which model should it promote? Explain, with relevant calculations. | |||||||||||||
Solutions
Expert Solution
| a) | ||||
| Standard | Deluxe | Super | Total | |
| Sales in units | 12000 | 5000 | 3000 | 20000 |
| Price per unit (a) | $85.00 | $120.00 | $166.00 | |
| Variable cost per unit (b) | $34.00 | $45.00 | $84.00 | |
| Contribution Margin per unit = a - b | $51.00 | $75.00 | $82.00 | |
| Product | Unit selling price (a) | Sales Mix | Weights (b) | Weighted Selling Price a x b |
| Standard | $85.00 | 12000 | 60.00% | $51.00 |
| Deluxe | $120.00 | 5000 | 25.00% | $30.00 |
| Super | $166.00 | 3000 | 15.00% | $24.90 |
| Total | 20000 | 100.00% | $105.90 | |
| Product | Unit Contribution Margin (a) | Sales Mix | Weights (b) | Weighted CM (a x b) |
| Standard | $51.00 | 12000 | 60.00% | $30.60 |
| Deluxe | $75.00 | 5000 | 25.00% | $18.75 |
| Super | $82.00 | 3000 | 15.00% | $12.30 |
| Total | 20000 | 100.00% | $61.65 | |
| Product | Weighted Selling Price | Weighted Contribution Margin | ||
| Standard | $51.00 | $30.60 | ||
| Deluxe | $30.00 | $18.75 | ||
| Super | $24.90 | $12.30 | ||
| Total | $105.90 | $61.65 | ||
| Contribution Margin Ratio = CM/SP = $61.65/$105.90 | 58.22% | |||
| Dunphy's breakeven point in sales dollars = Fixed Cost/Contribution margin ratio = $1,000,000/58.22% | $1,717,761.56 | |||
| b) | ||||
| Actual sales volume = 20,000 x $105.90 | $2,118,000.00 | |||
| BEP sales Dollar | -$1,717,761.56 | |||
| Margin of safety (Actual sales - BEP) | $400,238.44 | |||
| c) | ||||
| BEP Dollars = FC + Desired Profit / CM Ratio | ||||
| BEP Dollars = $1,000,000 + $2,400,000 / 58.22% | $5,840,389.29 |
ekkarill92 answered 9 months agoRelated Solutions
Dillon Inc. produces three models of a certain product: Standard, Deluxe, and Super. Relevant data: Standard...
Dillon Inc.
produces three models of a certain product: Standard, Deluxe, and
Super. Relevant data:
Standard
Deluxe
Super
Sales in units
12,000
5,000
3,000
Price per unit
85
120
166
Variable cost per unit
34
45
84
Fixed costs are $1,000,000.
a)
Compute Dillon Inc. breakeven point in sales
dollars with the current sales mix.
b)
Compute Dillon Inc. current margin of safety.
c)
What is forecast net income at sales of $2,400,000
given the current sales mix?
d)
Marketing...
Agnew Manufacturing produces and sells three models of a single product, Standard, Superior, and DeLuxe, in...
Agnew Manufacturing produces and sells three models of a single
product, Standard, Superior, and DeLuxe, in a local market and in a
regional market. At the end of the first quarter of the current
year, the following income statement (in thousands of dollars) has
been prepared.
Total
Local
Regional
Sales revenue
$
15,300
$
11,790
$
3,510
Cost of goods sold
12,105
9,315
2,790
Gross margin
$
3,195
$
2,475
$
720
Marketing costs
1,230
705
525
Administrative costs
606...
Agnew Manufacturing produces and sells three models of a single product, Standard, Superior, and DeLuxe, in...
Agnew Manufacturing produces and sells three models of a single
product, Standard, Superior, and DeLuxe, in a local market and in a
regional market. At the end of the first quarter of the current
year, the following income statement (in thousands of dollars) has
been prepared:
Total
Local
Regional
Sales revenue
$
7,800
$
6,000
$
1,800
Cost of goods sold
6,060
4,650
1,410
Gross margin
$
1,740
$
1,350
$
390
Marketing costs
630
360
270
Administrative costs
312...
Katy Company manufactures three product models, Standard, Premium, and Deluxe. The following is the data for...
Katy Company manufactures three product models, Standard,
Premium, and Deluxe. The following is the data for each product per
week.
Standard
Premium
Deluxe
Total
Maximum weekly demand (in units)
300
250
200
750
units
Current weekly production (in units)
200
200
200
600
units
Contribution margin per unit
$40
$45
$60
Number of machine hours required
2
3
5
Maximum Machine hours per week
2,000
hours
Required)
a) What is the contribution margin per machine hour for each
model? (10...
West Coast Designs produces three products: super, deluxe, and generic. Super and deluxe are its main...
West Coast Designs produces three products: super, deluxe, and
generic. Super and deluxe are its main products; generic is a
by-product of super. Information on the past month’s production
processes follows. In Department A, 220,000 units of the raw
material X-1 are processed at a total cost of $399,020. After
processing in Department A, 50 percent of the units are transferred
to Department B, and 50 percent of the units (now unprocessed
deluxe) are transferred to Department C. In Department...
Taylor Corporation produces two models of their leather brief cases: deluxe and standard. The four activities...
Taylor Corporation produces two models of their leather brief
cases: deluxe and standard. The four activities and four drivers
are as follows:
Hours
Activities:
Cost
Driver
Deluxe
Standard
Total
Cutting
$ 96,000
Cutting hours
2,200
1,300
3,500
Assembling
42,000
Assembly hours
1,150
980
2,130
Inspecting
15,000
Inspection hours
800
500
1,300
Reworking
8,000
Rework hours
20
35
55
Required:
Calculate the consumption ratios for the four
drivers, rounding to 2 decimal places.
Calculate the activity rates that would be used...
Biscayne’s Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: Standard Deluxe...
Biscayne’s Rent-A-Ride rents two models of automobiles: the
standard and the deluxe. Information follows:
Standard
Deluxe
Rental price per day
$
40.00
$
46.00
Variable cost per day
14.40
18.40
Biscayne’s total fixed cost is $13,120 per month.
Required:
1. Determine the contribution margin per rental day and
contribution margin ratio for each model that Biscayne’s offers.
(Round your "Unit Contribution
Margin" answers to 2 decimal
places.)
2. Which model would Biscayne’s prefer to
rent?
Deluxe Model
Standard Model
3....
Biscayne’s Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: Standard Deluxe...
Biscayne’s Rent-A-Ride rents two models of automobiles: the
standard and the deluxe. Information follows:
Standard
Deluxe
Rental price per day
$
46.00
$
54.00
Variable cost per day
18.40
24.30
Biscayne’s total fixed cost is $14,525 per month.
Required:
1. Determine the contribution margin per rental day and
contribution margin ratio for each model that Biscayne’s offers.
(Round your "Unit Contribution
Margin" answers to 2 decimal
places.)
2. Which model would Biscayne’s prefer to
rent?
Deluxe Model
Standard Model
3....
Biscayne’s Rent-A-Ride rents two models of automobiles: the standard and the deluxe. Information follows: Standard Deluxe...
Biscayne’s Rent-A-Ride rents two models of automobiles: the
standard and the deluxe. Information follows:
Standard
Deluxe
Rental price per day
$
30.00
$
38.00
Variable cost per day
10.50
15.20
Biscayne’s total fixed cost is $18,500 per month.
Required:
1. Determine the contribution margin per rental day and
contribution margin ratio for each model that Biscayne’s offers.
(Round your "Unit Contribution
Margin" answers to 2 decimal
places.)
2. Which model would Biscayne’s prefer to
rent?
Deluxe Model
Standard Model
3....
Par, Inc., produces a standard golf bag and a deluxe golf bag on a weekly basis....
Par, Inc., produces a standard golf bag and a deluxe golf bag on
a weekly basis. Each golf bag requires time for cutting and dyeing
and time for sewing and finishing, as shown in the following
table:
Hours Required per Bag
Product
Cutting and Dyeing
Sewing and Finishing
Standard Bag
1/22
11
Deluxe Bag
11
2/33
The profits per bag and weekly hours available for cutting and
dyeing and for sewing and finishing are as follows:
Product
Profit per Unit...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- please write simple python code Write a program to replicate the behavior of UNIX utility “tail”....
- The International Space Station uses the electrolysis of water to continuously replenish the oxygen in the...
- You are planning on setting up a new Best Buy in Saudi Arabia. What is your...
- Explain and give your opinion about Madison’s idea of factions and how electing elite representatives can...
- Consumer Behaviour and Marketing Psychology Create 10 survey questions that designed to examine why consumers decided...
- Identify three events that create stress in your life. What are the ways that you could...
- 3-year pedagogical plan for grade 4 to 6 students
ADVERTISEMENT