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Problem 5-28 (Algo) Sales Mix; Multiproduct Break-Even Analysis [LO5-9] Topper Sports, Inc., produces high-quality sports equipment....
Problem 5-28 (Algo) Sales Mix; Multiproduct Break-Even Analysis [LO5-9]
Topper Sports, Inc., produces high-quality sports equipment. The company’s Racket Division manufactures three tennis rackets—the Standard, the Deluxe, and the Pro—that are widely used in amateur play. Selected information on the rackets is given below:
| Standard | Deluxe | Pro | ||||
| Selling price per racket | $ | 55.00 | $ | 70.00 | $ | 100.00 |
| Variable expenses per racket: | ||||||
| Production | $ | 33.00 | $ | 35.00 | $ | 36.00 |
| Selling (5% of selling price) | $ | 2.75 | $ | 3.50 | $ | 5.00 |
All sales are made through the company’s own retail outlets. The Racket Division has the following fixed costs:
| Per Month | ||
| Fixed production costs | $ | 142,000 |
| Advertising expense | 122,000 | |
| Administrative salaries | 72,000 | |
| Total | $ | 336,000 |
Sales, in units, over the past two months have been as follows:
| Standard | Deluxe | Pro | Total | |
| April | 2,000 | 1,000 | 5,000 | 8,000 |
| May | 8,000 | 1,000 | 3,000 | 12,000 |
Required:
1-a. Prepare contribution format income statements for April.
1-b. Prepare contribution format income statements for May.
3. Compute the Racket Division’s break-even point in dollar sales for April.
4. Whether the break-even point would be higher or lower with May’s sales mix than with April’s sales mix?
5. Assume that sales of the Standard racket increase by $22,200. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $22,200? Do not prepare income statements; use the incremental analysis approach in determining your answer.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Problem 5-28 (Algo) Sales Mix; Multiproduct Break-Even Analysis [LO5-9] Topper Sports, Inc., produces high-quality sports equipment....
Problem 5-28 (Algo) Sales Mix; Multiproduct Break-Even Analysis
[LO5-9]
Topper Sports, Inc., produces high-quality sports equipment. The
company’s Racket Division manufactures three tennis rackets—the
Standard, the Deluxe, and the Pro—that are widely used in amateur
play. Selected information on the rackets is given below:
Standard
Deluxe
Pro
Selling price per racket
$
40.00
$
60.00
$
90.00
Variable expenses per racket:
Production
$
22.00
$
27.00
$
31.50
Selling (5% of selling price)
$
2.00
$
3.00
$
4.50
All...
Problem 6-28 Sales Mix; Commission Structure; Multiproduct Break-Even Analysis [LO6-9] Carbex, Inc., produces cutlery sets out...
Problem 6-28 Sales Mix; Commission Structure; Multiproduct
Break-Even Analysis [LO6-9]
Carbex, Inc., produces cutlery sets out of high-quality wood and
steel. The company makes a Standard set and a Deluxe set and sells
them to retail department stores throughout the country. The
Standard set sells for $86, and the Deluxe set sells for $101. The
variable expenses associated with each set are given below.
Standard
Deluxe
Variable production costs
$
28.00
$
43.00
Sales commissions (28% of sales price)
$...
Problem 5-21 Sales Mix; Multiproduct Break-Even Analysis [LO5-9] Gold Star Rice, Ltd., of Thailand exports Thai...
Problem 5-21 Sales Mix; Multiproduct Break-Even Analysis
[LO5-9]
Gold Star Rice, Ltd., of Thailand exports Thai rice throughout
Asia. The company grows three varieties of rice—White, Fragrant,
and Loonzain. Budgeted sales by product and in total for the coming
month are shown below:
Product
White
Fragrant
Loonzain
Total
Percentage of total
sales
48
%
20
%
32
%
100
%
Sales
$
331,200
100
%
$
138,000
100
%
$
220,800
100
%
$
690,000
100
%
Variable expenses
99,360...
Problem 5-27 Sales Mix; Break-Even Analysis; Margin of Safety [LO5-7, LO5-9] Island Novelties, Inc., of Palau...
Problem 5-27 Sales Mix; Break-Even Analysis; Margin of Safety
[LO5-7, LO5-9]
Island Novelties, Inc., of Palau makes two products—Hawaiian
Fantasy and Tahitian Joy. Each product's selling price, variable
expense per unit and annual sales volume are as follows:
Hawaiian Fantasy
Tahitian Joy
Selling price per unit
$
30
$
125
Variable expense per unit
$
21
$
25
Number of units sold annually
10,000
5,600
Fixed expenses total $565,500 per year.
Required:
1. Assuming the sales mix given above, do...
Problem 5-20 (Algo) CVP Applications: Break-Even Analysis; Cost Structure; Target Sales [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6,...
Problem 5-20 (Algo) CVP Applications: Break-Even Analysis; Cost
Structure; Target Sales [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6,
LO5-8]
Northwood Company manufactures basketballs. The company has a
ball that sells for $25. At present, the ball is manufactured in a
small plant that relies heavily on direct labor workers. Thus,
variable expenses are high, totaling $15.00 per ball, of which 60%
is direct labor cost.
Last year, the company sold 54,000 of these balls, with the
following results:
Sales (54,000 balls)
$...
Problem 5-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5,...
Problem 5-29 (Algo) Changes in Cost Structure; Break-Even
Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5,
LO5-7, LO5-8]
Morton Company’s contribution format income statement for last
month is given below:
Sales (48,000 units × $23 per unit)
$
1,104,000
Variable expenses
772,800
Contribution margin
331,200
Fixed expenses
264,960
Net operating income
$
66,240
The industry in which Morton Company operates is quite sensitive
to cyclical movements in the economy. Thus, profits vary
considerably from year to year according to general...
Problem 5-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5,...
Problem 5-29 (Algo) Changes in Cost Structure; Break-Even
Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5,
LO5-7, LO5-8]
Morton Company’s contribution format income statement for last
month is given below:
Sales (48,000 units × $23 per unit)
$
1,104,000
Variable expenses
772,800
Contribution margin
331,200
Fixed expenses
264,960
Net operating income
$
66,240
The industry in which Morton Company operates is quite sensitive
to cyclical movements in the economy. Thus, profits vary
considerably from year to year according to general...
Problem 5-29 (Algo) Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5,...
Problem 5-29 (Algo) Changes in Cost Structure; Break-Even
Analysis; Operating Leverage; Margin of Safety [LO5-4, LO5-5,
LO5-7, LO5-8]
Morton Company’s contribution format income statement for last
month is given below:
Sales (47,000 units × $22 per unit)
$
1,034,000
Variable expenses
723,800
Contribution margin
310,200
Fixed expenses
248,160
Net operating income
$
62,040
The industry in which Morton Company operates is quite sensitive
to cyclical movements in the economy. Thus, profits vary
considerably from year to year according to general...
Problem 5-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO5-1, LO5-3, LO5-4, LO5-5,...
Problem 5-22 (Algo) CVP Applications; Contribution Margin Ratio;
Break-Even Analysis; Cost Structure [LO5-1, LO5-3, LO5-4, LO5-5,
LO5-6]
Due to erratic sales of its sole product—a high-capacity battery
for laptop computers—PEM, Inc., has been experiencing financial
difficulty for some time. The company’s contribution format income
statement for the most recent month is given below:
Sales (13,100 units × $20 per unit)
$
262,000
Variable expenses
157,200
Contribution margin
104,800
Fixed expenses
116,800
Net operating loss
$
(12,000
)
Required:
1....
Topper Sports, Inc., produces high-quality sports equipment. The company’s Racket Division manufactures three tennis rackets—the Standard,...
Topper Sports, Inc., produces high-quality sports equipment. The
company’s Racket Division manufactures three tennis rackets—the
Standard, the Deluxe, and the Pro—that are widely used in amateur
play. Selected information on the rackets is given below:
Standard Deluxe Pro
Selling Price per racket
$40.00
$60,00
$90.00
Variable expenses per racket:
Production
$22.00
$27.00
$31.50
Selling (5% of selling price)
$2.00
$3.00
$4.50
All sales are made through the company’s own retail outlets. The
Racket Division has the following fixed costs:
Per...
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