CVP Analysis of Multiple Products Steinberg Company produces commercial printers
ID: 2536121 • Letter: C
Question
CVP Analysis of Multiple Products Steinberg Company produces commercial printers. One is the regu... CVP Analysis of Multiple Products Steinberg Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Steinberg expects to sell 80,000 regular models and 16,000 deluxe models. A segmented income statement for the two products is as follows:
Regular Model Deluxe Model Total Sales
sales $12,800,000 $10,720,000 $23,520,000
Less: Variable costs 7,680,000 6,432,000 14,112,000
Contribution margin $5,120,000 $4,288,000 $9,408,000
Less: Direct fixed costs 1,200,000 960,000 2,160,000
Segment margin $3,920,000 $3,328,000 $7,248,000
Less: Common fixed costs 1,485,600
Operating income $5,762,400
Required: 1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit.
Regular models ___________________ units its not 18750
Deluxe models ____________________ unitsits not 3582
2. Using information only from the total column of the income statement, compute the sales revenue that must be generated for the company to break even. Round the contribution margin ratio to four decimal places. Use the rounded value in the subsequent computation. (Express as a decimal-based amount rather than a whole percentage.) Round the amount of revenue to the nearest dollar.
Contribution margin ratio ____________ its not 40%
Revenue $____________
Explanation / Answer
Solution: 1 Computation of Break Even Units: Particulars Regualr Model Deluxe Model Total Units Sale 80000 16000 Selling Price Per unit 160 670 Regular Model = (12800000/80000) Deluxe Model = (10720000/16000) Less: Variable Cost per unit 96 402 Regular Model = (7680000/80000) Deluxe Model = (6432000/16000) Contribution per Unit 64 268 Fixed Cost 1200000 960000 Common Fixed Cost (in the ratio of units sold)(5:1) 1238000 247600 Total Fixed Cost 2438000 1207600 Break even units (Total Fixed Cost/Contribution per unit) 38094 4506 2 Total Sales revenue for break even Total Sales Regualr Model (38094*160) 6095000 Deluxe Model (4506*670) 3019000 9114000 Less: Total Variable Cost Regualr Model (38094*96) 3657000 Deluxe Model (4506*402) 1811400 5468400 Total Contribution 3645600 Contribution Margin (Total Contribution/Total Sales)*100 40% Contribution Margin = 40% Total Revenue = $9114000