The Terrence Co. manufactures two products, Baubles and Trinkets. The following
ID: 2567772 • Letter: T
Question
The Terrence Co. manufactures two products, Baubles and Trinkets. The following are projections for the coming year:
Baubles
Trinkets
10,400 units
5,200 units
Sales
$
10,400
$
10,400
Costs:
Fixed
$
2,100
$
3,570
Variable
7,280
9,380
4,160
7,730
Income before taxes
$
1,020
$
2,670
How many Baubles will be sold at the break-even point, assuming that the facilities are jointly used with the sales mix remaining constant?
13,230
12,285
5,670
7,000
Baubles
Trinkets
10,400 units
5,200 units
Sales
$
10,400
$
10,400
Costs:
Fixed
$
2,100
$
3,570
Variable
7,280
9,380
4,160
7,730
Income before taxes
$
1,020
$
2,670
Explanation / Answer
Baubles Trinkets 10,400 units 5,200 units Sales 10,400 10,400 Costs: Fixed 2,100 3,570 Variable 7,280 4,160 Income before taxes 1,020 2,670 Baubles Trinkets Total Units Sold 10400 5200 15600 Sales Mix 66.67% 33.33% Baubles Trinkets Sales 10400 10400 Variable 7280 4160 Contribution 3120 6240 Units Sold 10400 5200 Contribution PU 0.30 1.20 Sales Mix 66.67% 33.33% Sales Mix * Contribution PU 0.20 0.40 Total Contribution 0.60 Total Fixed Cost 5,670 Total Contribution 0.60 Break Even Units 9450 (BEP=Fixed Cost/Cont PU) Baubles Trinkets Sales Mix is Constant 66.67% 33.33% Sales Mix*BEP Units 6300 3150
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