1. Keaubie Corporation sells three different sets of sportswear. Sleek sells for
ID: 2556038 • Letter: 1
Question
1. Keaubie Corporation sells three different sets of sportswear. Sleek sells for $30 and has variable costs of $18: Smooth sells for $50 and has variable costs of $30; Potent sells for $90 and has variable costs of $45. The sales mix of the three sets is. Sleek, 50%; Smooth, 30%; and a. What is the weighted-average unit contribution margin? b. If FC 735,000, compute the break-even in units and break-even in units per product. C. If TNI = 357.000, compute the units needed to reach TNI and the units per product to reach TNI. d. Prove TNI units per product are correct. 2. Morgan Corporation sells two product lines. The sales mix of the product lines is: Standard, 60%, and Deluxe, 40%. The contribution margin ratio of each line is: Standard, 35%; and Deluxe. 45%. Garrett's fixed costs are $1,950,000. What is the dollar amount of Deluxe sales at the break-even point? 3. Trail King manufactures mountain bikes. It has fixed costs of $5,360,000. Trail King's sales mix and contribution margin per unit is shown as follows: Contribution Margin Sales Mix Destroyer 2096 Voyager 55% $120 $ 60 $40 Rebel 25% Compute the number of each type of bike that the company would need to sell in order to brealk even under this product mix 4. Account-Able Company provides primarily two lines of service: accounting and tax. Accounting related services represent 60% of its revenue and provide a contribution margin ratio of 30%. Tax services represent 40% of its revenue and provide a 45% contribution margin ratio. The company's fixed costs are $9,000,000 (a) Calculate the revenue from each type of service that the company must achieve to break even. (b) The company has a desired net income of $1,800,000. What amount of revenue would Account-Able earn from tax services if it achieves this goal with the current sales mix? 5. Norton Corporation is consideringbuying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $300,000. Net income is expected to remain the same at $100,000 a. Compute the degree of operating leverage before and after the purchase of the new equipment and interpret your results. b. Compute the change in net income if Norton experiences a 15% increase in sales (before and after purchase)Explanation / Answer
Solution 1 a:
Weighted average unit contribution margin = $21 per unit
Solution 1b:
Fixed cost = $735,000
Breakeven point (In units) = Fixed cost / Weighted average unit contribution margin = $735,000 / $21 = 35000 units
Breakeven units (Sleek) = 35000*50% = 17500 units
Breakeven units (Smooth) = 35000*30% = 10500 units
Breakeven units (P0tent) = 35000*20% = 7000 units
Solution 1c:
Total net income (TNI) = $357,000
Total contibution = $357,000 + $735,000 = $1,092,000
Nos of units needed to reach TNI = Total contribution / Weighted average contribution per unit
= $1,092,000/ $21 = 52000 units
Units of Sleek need to reach TNI= 52000*50% = 26000 units
Units of Smooth need to reach TNI= 52000*30% = 15600 units
Units of Potent need to reach TNI= 52000*20% = 10400 units
Solution 1d:
Computation of weighted average contribution margin per unit - Keauble Corporation Particulars Sleek Smooth Potent Total Selling price per unit $30.00 $50.00 $90.00 Variable cost per unit $18.00 $30.00 $45.00 Contribution margin per unit $12.00 $20.00 $45.00 Sales Mix 50% 30% 20% Weighted average contribution per unit $6.00 $6.00 $9.00 $21.00Related Questions
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