CVP question The Young Manufacturing Company produces the following three produc
ID: 2452540 • Letter: C
Question
CVP question
The Young Manufacturing Company produces the following three products: Fixed costs are $76,000 per year. Fifty percent of all sales in units are hammers, 30 percent are screwdrivers, and 20 percent are saws. Required: Calculate the breakeven point in total number of packages. Calculate the number of hammers that will be sold at breakeven. Calculate total dollar sales to obtain an operating income of $19,000. Prepare a contribution margin income statement, including a column for each product and a column for the company as a whole based on a target operating income of $19,000.Explanation / Answer
A)
Combined Contribution Margin per unit = Hammer Contribution Margin *Weight of hammer + Screwdriver Contribution Margin *Weight of Screwdriver + Saws Contribution Margin *Weight of Saws
Combined Contribution Margin per unit = 12*50% + 4*30% + 20*20%
Combined Contribution Margin per unit = 11.20
Break Even Point = Total Fixed Cost/Combined Contribution Margin per unit
Break Even Point = 76000/11.20
Break Even Point = 6786 Package
B) Number of Hammer to be sold at Break Even = Total Break Even Point*Weight of Hammer
Number of Hammer to be sold at Break Even = 6786*50%
Number of Hammer to be sold at Break Even = 3393
C)
Combined Contribution Margin ratio = Hammer Contribution Margin ratio *Weight of hammer + Screwdriver Contribution Margin ratio *Weight of Screwdriver + Saws Contribution Margin ratio *Weight of Saws
Combined Contribution Margin ratio = 12/40*50% + 4/16*30% + 20/50*20%
Combined Contribution Margin ratio = 30.50%
Total Dollar sale to obtain operating income of $ 19000 = (Total Fixed Cost+operating income)/Combined Contribution Margin ratio
Total Dollar sale to obtain operating income of $ 19000 = (76000+19000)/30.50%
Total Dollar sale to obtain operating income of $ 19000 = $ 311,475.41
D)
Hammer Screwdriver Saw Total Sale 155,738 93,443 62,295 311,476 Variable cost 109,017 70,082 37,377 216,476 Contribution Margin 46,721 23,361 24,918 95,000 Fixed Cost 76,000 Net operating Income 19,000