Demo-case-3-solution

Demo-case-3-solution - number of such 5-unit packages to...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Demo Cases in Chapter 3 Case 1 solution: 1. Operating profit = (P – V)X – F = ($150 - $90) × 1,200 - $48,000 = $24,000. 2. Break-even volume in units (X*) = V - P F = 90 $ 150 $ 000 , 48 $ - = 800 units. Break-even volume in sales dollars (PX*) = $150 × 800 units = $120,000. 3. Contribution margin ratio = P V - P = $150 $90 $150 - × 100% = 40%. 4. Target profit = $57,000, Sales dollars needed (PX**) = F Target profit (P-V)/P + = % 40 000 , 57 $ 000 , 48 $ + = $262,500. Units needed (X**) = PX** P = $262,500 $150 . 5. Assume X to be the unknown number of units sold that would produce the operating profit of 15% of sales dollars, then (P – V)X – F = 15% × PX ($150 - $90)X – 15% × $150 × X = $48,000 X = 1,280 units. Case 2 solution: 1. Out of every 5 units sold, three will be Jig Saws and two will be Circular Saws. Let X be the
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: number of such 5-unit packages to break even. Then the contribution margin from this package will be $60 3 + $80 2 = $340. The break-even point (X) = $68,000 $340 = 200 packages. This means that a total of 600 Jig Saws (= 3 200 units) and 400 Circular Saws (= 2 200 units) have to be sold to break even. 2. Since 60 percent Jig Saws and 40 percent Circular Saws constitute the product mix, the weighted-average contribution margin per unit = .60 $60 + .40 $80 = $68. The break-even point for both products = $68,000 $68 = 1,000 units. Jig Saws must be sold 600 units (= .60 1,000 units) and Circular Saws 400 units (= .40 1,000 units) to break even....
View Full Document

Ask a homework question - tutors are online