52 extensions of the cvp basic modelmultiple products

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Unformatted text preview: ck? 3-51. Extensions of CVP Analysis—Multiple Products (finding missing data) Clovis Supply sells two models of saddles to retail outfitters—basic and custom. Basic saddles sell for $1,000 each and custom saddles sell for $1,500. The variable cost of a basic saddle is $600 and that of a custom saddle is $750. Annual fixed costs at Clovis are $280,500. The break-even point at the current sales mix is 500 total units. Required How many basic saddles and how many custom saddles are sold at the break-even level? In other cor50782_ch01_001-072.indd 1 words, what is the assumed sales mix? lan27114_ch03_080-109.indd 105 (L.O. 4) ✓ Related Resources See pages 000 to 000 of the Annotated Instructor’s Edition for general suggestions related to the chapters in Part One. 1 10/5/09 11:09:29 PM 10/22/09 10:34:04 PM REVISED PAGES Part II 106 Cost Analysis and Estimation 1 3.52. Extensions of the CVP Basic Model—Multiple Products and Taxes PART Assume that Ocean King Products sells three varieties of canned seafood with the following prices and costs: Selling Price per Case mhhe.com/lanen3e Variable Cost per Case Fixed Cost per Month $3 5 10 – $2 3 6 – – – – $46,200 Variety 1 . . . . . . . . Variety 2 . . . . . . . . Variety 3 . . . . . . . . Entire firm. . . . . . . (L.O. 4) Orientation The sales mix (in cases) is 40 percent Variety 1, 35 percent Variety 2, Organizing Yourself Preparing and and 25 percent Variety 3. for Success in College Required a. At what sales revenue per month does the company break even? b. Suppose the company is subject to a 35 percent tax rate on income. At what sales revenue per month will the company earn $40,950 after taxes assuming the same sales mix? (L.O. 4) S 3.53. Extensions of the CVP Model—Multiple Products and Taxes Assume that Limitless Labs, Inc., offers three basic drug-testing services for professional athletes. Here are its prices and costs: Price per Unit Basic . . . . . . . . . . . . . Retest . . . . . . . . . . . . Vital . . . . . . . . . . . . . . Variable Cost per Unit CH $ 500 $ 120 A P T 800 400 4,000 Making Yourself 2,800 1 Units Sold per Year E R S850 N I 100 50 Successful PART ONE in College Variable costs include the labor costs of 2 medical technicians at the lab. Fixed costs of the Approaching College Reading and $390,000 per year include building and equipment costs and the College-Level Vocabulary Developing a costs of administration. A basic “unit” is a routine drug test administered. A retest is given if there is concern about the results of the first test, particularly if the test indicates that the athlete has taken drugs that are on the banned drug list. Retests are not done by the laboratory that performed the basic test. A “vital” 3 Approaching College Assignments: test is the laboratory’s code for a high-profile case. This might be a test of a famous athlete and/ Reading Textbooks and Following Directions or a test that might be challenged in court. The laboratory does extra work...
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