Compute the number of each type of bike that the company would need to sell in

# Compute the number of each type of bike that the

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Compute the number of each type of bike that the company would need to sell in order to break even under this product mix. Ans: N/A, SO: 3, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving/Decision Making, IMA: Business Economics Solution 138 (8 12 min.) Weighted-Average Sales Mix × Contribution Margin Contribution Margin Destroyer 20% × \$120 \$24 6 - 45 Cost-Volume-Profit Analysis: Additional Issues Voyager 50% × \$ 60 \$30 Rebel 30% × \$ 40 \$12 \$66 Total break-even sales = \$4,620,000 ÷ \$66 = 70,000 bikes 6 - 46 Test Bank for Managerial Accounting, Fifth Edition Ex 138 (cont.) Sales Mix Destroyer 20% × 70,000 = 14,000 bikes Voyager 50% × 70,000 = 35,000 bikes Rebel 30% × 70,000 = 21,000 bikes Ex. 139 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 40% contribution margin ratio. The company’s fixed costs are \$5,100,000. Instructions (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 \$1,700,000. What amount of revenue would Account-Able earn from tax services if it achieves this goal with the current sales mix? Ans: N/A, SO: 3, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving/Decision Making, IMA: Reporting Solution 139 (10 15 min.) (a) Contribution Weighted-Average Sales Mix Margin Ratio Contribution Margin Ratio Accounting 60% 30% 18% Tax 40% 40% 16% 34% Total break-even sales = \$5,100,000 ÷ .34 = \$15,000,000 Sales Mix Accounting 60% × \$15,000,000 = \$9,000,000 Tax 40% × \$15,000,000 = \$6,000,000 (b) Sales to achieve target net income = (\$5,100,000 + \$1,700,000) ÷ .34 = \$20,000,000 Sales Mix Tax 40% × \$20,000,000 = \$8,000,000 Ex. 140 Mad City Flash Company sells computers and video game systems. The business is divided into two divisions along product lines. Variable costing income statements for the current year are presented below: Computers VG Systems Total Sales \$700,000 \$300,000 \$1,000,000 Variable costs 420,000 210,000 630,000 Contribution margin \$280,000 \$ 90,000 370,000 6 - 47 Cost-Volume-Profit Analysis: Additional Issues Fixed costs 259,000 Net income \$ 111,000 6 - 48 Test Bank for Managerial Accounting, Fifth Edition Ex 140 (cont.) Instructions (a)Determine the sales mix and contribution margin ratio for each division.(b)Calculate the company’s weighted-average contribution margin ratio.(c)Calculate the company’s break-even point in dollars.(d)Determine the sales level, in dollars, for each division at the break-even point.Ans: N/A, SO: 3, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC:Problem Solving/Decision Making, IMA: Business Economics Solution 140 (15 20 min.) (a) Sales mix: Computers: \$700,000 ÷ (\$700,000 + \$300,000) = 70% VG Systems \$300,000 ÷ (\$700,000 + \$300,000) = 30% Contribution margin ratio: Computers: \$280,000 ÷ \$700,000 = 40% VG Systems: \$ 90,000 ÷ \$300,000 = 30% (b) Weighted-average contribution margin ratio = (70% × 40%) + (30% × 30%) = 37% (c) Break-even point in dollars = \$259,000 ÷ .37 = \$700,000 (d) Sales dollars at break-even point: Computers: \$700,000 × .70 = \$490,000 VG Systems: \$700,000 × .30 = \$210,000 Ex. 141 Movie House Company has 4,000 machine hours available to produce either Product 22 or Product 44. The cost accounting department developed the following unit information for each  #### You've reached the end of your free preview.

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