can you please be more careful as it is the second time i have to submitte qusti

ID: 2340399 • Letter: C

Question

can you please be more careful as it is the second time i have to submitte qustion

Multiple-Product Analysis, Changes in Sales Mix, Sales to Earn Target Operating Income Basu Company produces two types of sleds for playing in the snow: basic sled and aerasled. The projected income for the coming year, segmented by product ine, follows: Total $3,000,000 2400,000 $5,400,000 1,000,000 1,000,000 2,000,000 $2,000,000 1,400,000 $3,400,000 650,000 1,42,000 $1,222,000 750,000 ,972,000 198,900 1,773,100 Dasic Sled Aerosled Sales Total variable cost Contribution margin Direct foced cost Product margin Common fixed cout 779,000 Operating income The selling prices are $30 for the basic sled and $60 for the aerosled. (Round break-even packages and break-even units to the nearest whole unit.) Required: L. Compute the number of units of each product that must be sold for Besu to break even. Basic 38,600 x units ero 10,572 x units 2. Assume that the marketing manager changes the sales mix of the two products so that the ratio is five basic sleds to three seroseds. Compute the number of units of each product that must be sold for Basu to break even. Round your answers to the nearest whole number. Basic 39,685 x units er 1636,00 x units 3. Conceptual Connection: Refer to the onginal data. Suppose that Basu can increase the sales of aerosleds with increased advertising. The extra advertising would cost an additional $195,000, and some of the potential purchasers of basic sleds would switch to aerosleds. In total, sales of seros eds would increase by 12.cou units, and sales of basic sleds would decrease by S,000 units, would Basu be better off with this strategy? If so, give the mount of increase in income. 125,000

Explanation / Answer

Answer to Part 1.

Basic Sled:
Sales = $3,000,000
Unit Selling price = $30
Units Sold = 3,000,000 / 30 = 100,000 Units
Variable Cost = $1,000,000
Variable Cost per Unit = 1,000,000 / 100,000 = $10

Contribution Margin per Unit = Selling Price per Unit – Variable Cost per Unit
Contribution Margin per Unit = $30 - $10 = $20

Break Even Point (in Units) = Fixed Cost / Contribution Margin per Unit
Break Even Point (in Units) = 778,000 / 20
Break Even Point (in Units) = 38,900 Units

Aerosled:
Sales = $2,400,000
Unit Selling price = $60
Units Sold = 2,400,000 / 60 = 40,000 Units
Variable Cost = $1,000,000
Variable Cost per Unit = 1,000,000 / 40,000 = $25

Contribution Margin per Unit = Selling Price per Unit – Variable Cost per Unit
Contribution Margin per Unit = $60 - $25 = $35

Break Even Point (in Units) = Fixed Cost / Contribution Margin per Unit
Break Even Point (in Units) = 650,000 / 35
Break Even Point (in Units) = 18,571 Units

Answer to Part 2.

Current Sales Mix = 5:2
Contribution per Unit mix= ($20 * 5/7) + ($35 * 2/7)
Contribution per Unit mix= $14.29 + $10
Contribution per Unit mix= $24.29

Total Fixed Cost = $778,000 + $650,000
Total Fixed Cost = $1,428,000

Break Even Mix = 1,428,000 / 170
Break Even Mix = 58,790

Basic Sled, Break Even Units = 58,790 * 5/7 = 41,993 Units
AeroSled, Break Even Units = 58,790 * 2/7 = 16,797 Units