Lindstrom Company produces two fountain pen models. Information about its produc

Question

Lindstrom Company produces two fountain pen models. Information about its products follows: Produt A Product H $155,000 $105.000 39.900 Saks revenue Less. Variable costs Contributiorn argi Total units sold 65,1 5,000 5,000 Lindstrom's fixed costs total $81,500 Required: 1. Determine Lincstrom's weighted-average unit contribution margin and weighted-average contribution margin ratio. Round your weighted-average CM to 2 decimal places and your CM ratio to 1 decimal place i.e. .123 should be entered as 12.3%). Wcighted-Avcragc CM per Unit Weighted Average CM Ratio 2. Calculate Lindstrormi's break-even point in units and in sales revenue. (Round your "Sales Revenue" answer to 2 decimal places and "Sales Units" answer to the nearest whole number.) Break-Everi Sales Uriits Unils Break Even Sales Revenue 3. Calculate the number of units that Lindstrom must sell to earn a S110,000 proft. (Round your answer to the nearest whole number.) t Sales Units Units 4. Calculate Lindstrom's margin of safety and margin of safety as a percentage of sales ir it sells 8,600 total pens. (Round your margin of safety in units to the nearest whole number and your percentage of sales answer to 2 decimal places (ie, .1234 should be entered as 12.34%)) Margin of Safety Units Margin of Safety as Percentage of Sales

Explanation / Answer

product A product H total Sales revenue 105,000 155000 260,000 100% less variable costs 39,900 52,700 92,600 35.6% contribution margin 65,100 102,300 167,400 64.4% total units sold 5,000 5,000 10,000 1) Weighted average contribution per unit= total contribution of all products/total units for all products 167400/10,000 16.74 Weighted average CM ratio 16.74/26          64.4 % Weighted average CM 16.74 per unit Weighted average CM Ratio           64.4 % 2) Break -Even sale units 4869 units Break even sales revenue 126552.80 BEP(units) = Fixed cost/average contribution per unit 81,500/16.74 4869 units BEP( sales) = fixed cost/average contribution margin ratio 81500/64.4% 126552.80 3) Target sales units 11440 units (81500+110000)/16.74 11439.67 4) Margin of safety 3731 units margin of safety as % of sales 43.38 % margin of safety = 8,600 - 4,869 % of sales = 3731/8600*100

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