I could really use some help with this question... it was posted previously by a

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I could really use some help with this question... it was posted previously by another student however no one ever replied but I know there is someone out there that can help me with this! Please & Thank you

pet. Hearth Manu House Manufact . Presented is ented is sales information for the year 2012. Cozy Kitchen All-House 1,500 $750,000 (450,000) $300,000 Total Units manufactured and sold 1,000 $300,000 (200,000) $100,000 Contribution margin . . Fixed costs. . . Before-tax profit Income taxes (40 percent) . After-tax proft 2,500 $1,050,000 (650,000) 400,000 (240,000) 160,000 (64,000) $ 96,000 Required a. Determine the current break-even point in sales dollars. b. With the current product mix and break-even point, determine the average unit contribution margin and unit sales c. Sales representatives believe that the total sales will increase to 3,000 units, with the sales mix likely shifting to 80 percent Cozy Kitchen and 20 percent All-House over the next few years. Evaluate the desirability of this projection.

Explanation / Answer

a) Current Break even point in Sales Dollars

Break even point means a point where contribution is equal to fixed cost means a point of no profit no loss

Because this is a multi product question we will use Sales Dollars as base ( Because we need to get that )

So, Total contribution = 400000

Total Sales = 1050000

Ratio = 400000/1050000 = 0.380952

We will apply this ratio to fixed cost and get the Break even point

= 240000/0.380952

= $630,000

b) Average unit contribution Margin

= Total contribution/Total Units

= 400000/2500

= $160 Per unit

Unit Sales

= 240000/160

= 1500 Units

Units sales As per product Mix

Cozy Kitchen = 1000/2500 = 40% = 1500*40% = 600 Units

All House = 1500/2500 = 60% = 1500*60% = 900 Units

c)

We can see that net income has gone down at the new Sales mix. We should not implement new Sales MIX.

Sales Total 3000 Units Cozy Kitchen All House Sales Mix 80% 20% Sales Unit 2400 600 Contribution Per Unit 100 200 Contribution in $ 240000 120000 Total Contribution 360000 Fixed cost 240000 Profit 120000 Taxes 48000 Net Income 72000

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