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Category > Management Posted 25 Oct 2017 My Price 8.00

Multiproduct Break-Even Analysis

PROBLEM 5–22 Sales Mix; Multiproduct Break-Even Analysis [LO9]

Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products—sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below:

 

 

 

 

Percentage of total sales . . . . . . . . . . .

48%

 

 

20%

 

 

32%

 

 

100%

 

Sales . . . . . . . . . . . . . . . . . . . . . . . . . .

$240,000

 

100%

$100,000

 

100%

$160,000

 

100%

$500,000

 

100%

Variable expenses . . . . . . . . . . . . . . . .

72,000

 

30%

80,000

 

80%

88,000

 

55%

240,000

 

48%

Contribution margin . . . . . . . . . . . . . . .

$168,000

 

70%

$ 20,000

 

20%

$ 72,000

 

45%

260,000

 

52%

Fixed expenses . . . . . . . . . . . . . . . . . .

 

 

 

 

 

 

 

 

 

223,600

 

 

Net operating income . . . . . . . . . . . . .

 

 

 

 

 

 

 

 

 

$ 36,400

 

 

 

Dollar sales to break-even = Fixed expenses = $223,600 = $430,000

 

CM ratio

 

0.52

 

As shown by these data, net operating income is budgeted at $36,400 for the month, and break-even sales at $430,000.

Assume that actual sales for the month total $500,000 as planned. Actual sales by product are: sinks, $160,000; mirrors, $200,000; and vanities, $140,000.

Required:

1.       Prepare a contribution format income statement for the month based on actual sales data. Present the income statement in the format shown above.

2.       Compute the break-even point in sales dollars for the month, based on your actual data.

3.       Considering the fact that the company met its $500,000 sales budget for the month, the presi- dent is shocked at the results shown on your income statement in (1) above. Prepare a brief memo for the president explaining why both the operating results and the break-even point in sales dollars are different from what was budgeted.

 

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Maurice Tutor
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Status NEW Posted 25 Oct 2017 06:10 PM My Price 8.00

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