Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The comp
ID: 2426685 • Letter: C
Question
Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a standard cutlery set and a deluxe set and sells them to retail department stores throughout the country. The standard set sells for $92, and the deluxe set sells for $107. The variable expenses associated with each set are given below Production costs Sales commissions (31% of sales price) Standard Deluxe 31.00 46.00 28.52 33.17 The company's fixed expenses each month are Advertising Depreciation Administrative $121,000 $ 26,500 71,000 Salespersons are paid on a commission basis to encourage them to be aggressive in their sales efforts. Mary Parsons, the financial vice president, watches sales commissions carefully and has noted that they have risen steadily over the last year. For this reason, she was shocked to find that even though sales have increased, profits for the current month-May-are down substantially from April. Sales, in sets, for the last two months are given below: April Ma Standard Deluxe Total 9,200 2,600 6,600 9,200 5,600 3,600Explanation / Answer
1-a
amount in $
Administrative 71,000
Net income 63,576
1-a
amount in $
Administrative 71,000
Net income 49,626
3-a
contribution of Standard=$92-$31-$28.52=$32.48
Contribution of deluxe=$107-$46-$33.17=$27.83
april mix contribution per unit=($32.48*5,600*$27.83*3,600)/9,200=$30.6604
total fixed cost=$218,500
Break even for april month=$218,500/$30.6604=7,126.46 Units=7,127 units(round)
3-b
contribution mix for may month per unit=(2,600*$32.48+6,600*$27.83)/9,200=$29.144
Breakeven point=$218,500/$29.144=7,497.26 units=7,498 units (round)
3-b higher
particulars standard deluxe total sales in units 5,600 3,600 9,200 sales(5,600*92) 515,200 385,200 900,400 Less:variable production cost(5600*31) 173,600 165,600 339,200 Sales commission (31%of sales) 159,712 119,412 279,124 Contribution 181,888 100,188 282,076 Less:Fixed-Advertising cost 121,000 Depreciation 26,500