Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models:

Question

Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 18,400 portable grills, 46,000 stationary grills, and 4,600 smokers. Information on the three models is as follows: Portable Stationary Smokers Price $92 $201 $252 Variable cost per unit 45 135 144 Total fixed cost is $2,064,960. Required:

1. What is the sales mix of portable grills to stationary grills to smokers?

2. Compute the break-even quantity of each product.

3. Prepare an income statement for Texas-Q for the coming year. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. Enter the contribution margin ratio as a percentage rounded to two decimal places; round the break-even sales revenue to the nearest dollar.

4. Compute the margin of safety for the coming year.

Explanation / Answer

1. Sales mix = 4:10:1

2.

3.

Overall contribution margin ratio = $4397600/$12098000 = 36.35%

Overall break-even sales revenue = $2064960/36.35% = $5680770

4. Margin of safety = Sales - Break-even sales = $12098000 - $5680770 = $6417230

Portable grills Stationary grills Smokers Sales units 18400 46000 4600 Divide by 200 92 230 23 Divide by 23 4 10 1

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