Question

On-the-Go, Inc., produces two models of traveling cases for laptop computers: the Programmer and the Executive. The bags have the following characteristics: Programmer Executive Selling price per bag $ 70 $ 100 Variable cost per bag $ 30 $ 50 Expected sales (bags) per year 8,000 12,000 The total fixed costs per year for the company are $661,000. Required: a. What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix is the same at the break-even point, compute the break-even point. (Round your final answer up to the nearest whole unit.) c. If the product sales mix were to change to nine Programmer-style bags for each Executive-style bag, what would be the new break-even volume for On-the-Go? (Round your final answer up to the nearest whole unit.)

Answer 1

Answer a	Anticipated level of profit
	Particulars	Amount
	Sales- Programmer (8000*70)	560000
	- Executives (12000*100)	1200000
	Less: Variable cost
	- Programmer (8000*30)	240000
	- Executives (12000*50)	600000
	Contribution	920000
	Less: Fixed cost	661000
	Net expected profit	259000
Answer b	Break even sales with same product mix
	= Fixed cost/ Weighted average contribution per unit
	= 661000/46
	14369.56522	or 14370 units total
	Weighted Contribution= Weighted Selling price- Weighted variable cost
	= (70*2/5+100*3/5)-(30*2/5+50*3/5)
	=(28+60)-(12+30)
	=46
Answer c	Break even sales with same product mix
	= Fixed cost/ Weighted average contribution per unit
	= 661000/41
	16121.95122	or 16122
	Weighted Contribution= Weighted Selling price- Weighted variable cost
	= (70*9/10+100*1/10)-(30*9/10+50*1/10)
	=(63+10)-(27+5)
	=41