Cornerstone Exercise 16.5 (Algorithmic) Multiple-Product Break-Even and Target P

Question

Cornerstone Exercise 16.5 (Algorithmic)
Multiple-Product Break-Even and Target Profit

Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 30,000 ceiling fans and 90,000 table fans in the coming year. Product price and cost information includes:

Common fixed selling and administrative expenses total $80,000.

Required:

1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)?
Sales mix of ceiling fans to table fans = :

2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Do not round intermediate calculations. If required, round your final answers to the nearest whole number.

Ceiling Fan Table Fan Price $50   $11   Unit variable cost $11   $4   Direct fixed cost $20,800   $46,000  

Explanation / Answer

Sales mix estimated for next year Particulars Ceiling Fan Table Fan Total Sales Units 30000 90000 120000 Sales mix 30000/120000 90000/120000 Sales mix 25% 75% 100% Calculation of Break even sales in units Particulars Ceiling Fan Table Fan Price 50 11 Less- Unit variable cost 11 4 Contribution per unit( sales price- variable cost) 39 7 Direct fixed cost 20800 46000 Common fixed selling and administrative expenses as per sales mix ratio 80000*25% 80000*75% Common fixed selling and administrative expenses as per sales mix ratio 20000 60000 Total fixed cost 40800 106000 Break even points in units 40800/39 106000/7 Break even points in units 1046 15143 Break even points in value 52308 166571

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