1) Data related to the expected sales of laptops and tablets for Tech Products I
ID: 2562686 • Letter: 1
Question
1) Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:
The estimated fixed costs for the current year are $11,682,000.
Required:
a. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year.
units
b. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year.
c. Assume that the sales mix was 60% laptops and 40% tablets. Compare the breakeven point with that in part (1). Why is it so different?
units
The break-even point is in this scenario than in part (1) because the sales mix is toward the product with the higher of product.
2)
Beck Inc. and Bryant Inc. have the following operating data:
a. Compute the operating leverage for Beck Inc. and Bryant Inc. If required, round to one decimal place.
b. How much would income from operations increase for each company if the sales of each increased by 10%? If required, round answers to nearest whole number.
c. The difference in the of income from operations is due to the difference in the operating leverages. Beck Inc.'s operating leverage means that its fixed costs are a percentage of contribution margin than are Bryant Inc.'s.
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Products Unit Selling Price Unit Variable Cost Sales Mix Laptops $1,600 $800 40% Tablets 900 450 60%Explanation / Answer
1.
a. Unit Contribution margin = Unit selling price - Unit variable cost
Unit Contribution margin for Laptops = 1,600 - 800 = 800
Unit Contribution margin for Tablets = 900 - 450 = 450
Weighted Average unit Contribution margin = (Laptops unit contribution margin*sales mix) - (Tablets unit contribution margin*sales mix)
= (800*40%) + (450*60%)
= 590
Breakeven point = Fixed costs / Weighted Average unit Contribution margin
= 11,682,000 / 590 = 19,800
b. Unit sales for Laptops = 19,800*40% = 7,920
Unit sales for Tablets = 19,800*60% = 11,880
c. Weighted Average unit Contribution margin = (Laptops unit contribution margin*sales mix) - (Tablets unit contribution margin*sales mix)
= (800*60%) + (450*40%) = 660
Breakeven point = Fixed costs / Weighted Average unit Contribution margin
= 11,682,000 / 660 = 17,700
The Breakeven point has reduced in this scenario than in part (1) because the sales mix increased towards the product with the higher contribution margin per unit.
2.
a. Operating leverage = Contribution margin / Operating income
Operating leverage for Beck Inc. = 171,000 / 57,000 = 3
Operating leverage for Bryant Inc. = 364,800 / 153,000 = 2.4
b. Operating leverage is the percentage change in operating income with the percenatge change in sales.
For Beck Inc. if the sales increases by 10% then the operating income increases by 30%(3*10%)
For Bryant Inc. if the sales increases by 10% then the operating income increases by 24%(2.4*10%)
c. The difference in the percentage of income from operations is due to the difference in the operating leverages. Beck Inc.'s higher operating leverage means that its fixed costs are a lower percentage of contribution margin than are Bryant Inc.'s.
Dollars Percentage Beck Inc. 17,100 (57,000*30%) 30% Bryant Inc. 36,480 (152,000*24%) 24%Related Questions
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