Please answer each of the following questions for the problem. Please also add t
ID: 2413280 • Letter: P
Question
Please answer each of the following questions for the problem. Please also add the following information
Units Sold:
Sure Shot = 10,000
Flight Dynamic = 20,000
Requirements:
1. Prepare a contribution format income statement for the company as a whole. Be sure to include a total column, unit, and percentage for each product line and the company as a whole.
2. What is the sales mix in units? Sales mix in dollars?
3. Compute the break-even point for the company in both units and dollars. At break-even, how many units of Sure Shot and Flight Dynamic are assumed to be sold? At break-even, how much in dollar sales is assumed to be Sure Shot and Flight Dynamic.
4. If Sales are expected to increase by $100,000 next month, how much do you expect net income to increase by?
5. Assume there is a shift in sales mix such that relatively more units of the Flight Dynamic will be sold. Will the weighted average CM ratio CM per unit increase or decrease? Will Break-even increase or decrease? Will Margin of Safety increase or decrease?
EXERCISE 5-12 Multiproduct Break-Even Analysis LO5- Olongapo Sports Corporation distributes two premium golf balls-Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow: Product Flight Dynamic Sure Shot Total $150,000 80% $250,000 $400,000 Sales CM ratio 36% Fixed expenses total $183,750 per month. page 230 Required: 1. Prepare a contribution format income statement for the company as a whole. Carry computations to one decimal place. 2. What is the company's break-even point in dollar sales based on the current sales mix? 3. If sales increase by $100,000 a month, by how much would you expect the monthly net operating income to increase? What are your assumptions?Explanation / Answer
Ans 1 Flight Dynamic % Sure shot % Total % Sales $150,000 100% 250000 100% $400,000 100% Less: Variable expenses 30000 20% 160000 64% $190,000 47.5 % (150000*20%) (250000*64%) Contribution Margin $120,000 80% $90,000 36% $210,000 52.5 % (210000/400000*100) Less: fixed expenses 183750 Net Operating Income $26,250 As per the main question at the bottom answe for 2 is $ sales in breakeven 350000 183750/.525 ans 3 Net Income will incraese by $100000*52.5% 52500 As the fixed expenses will remain same so additional contribution margin of $52500 as per your requirement Ans 2 Sales mix in units 1:2 10000:20000 or 1:2 3:5 sales mix in $ 150000:250000 or 15:25 or 3:5 ans 3 Flight Dynamic Sure shot Sales $150,000 250000 Less: Variable expenses 30000 160000 (150000*20%) (250000*64%) Contribution Margin $120,000 $90,000 No. of units 10000 20000 CM per unit $12 $5 Sales mix 1 2 $12 $10 weighted avg CM 22 Break even in units 8352 183750/22 $ sales in breakeven 350000 183750/.525 ans 4 Net Income will incraese by $100000*52.5% 52500 As the fixed expenses will remain same so additional contribution margin of $52500