Part 1: JTL MANUFACTURING has a sales mix of sprinklers, valves, and controllers
ID: 2743249 • Letter: P
Question
Part 1:
JTL MANUFACTURING has a sales mix of sprinklers, valves, and controllers as follows. Annual expected sales: Sale of sprinklers 460,000 units at $26.50 Sale of valves 1,480,000 units at $11.20 Sale of controllers 60,000 units at $42.50 Variable manufacturing cost per unit: Sprinklers $13.96 Valves $ 7.95 Controllers $29.75 Fixed manufacturing overhead cost (total) $760,000 Variable selling and administrative expenses per unit: Sprinklers $1.30 Valves $0.50 Controllers $3.41 Fixed selling and administrative expenses (total) $1,600,000
Instructions:
(a) Determine the sales mix based on unit sales for each product.
(b) Using the annual expected sales for these products, determine the weighted-average unit contribution margin for these three products. (Round to two decimal places.)
(c) Assuming the sales mix remains the same, what is the break-even point in units for these products?
Part 2
The section of JTL MANUFACTURING that produces controllers for the company provided the following information. Sales for month of February: 4,000 Variable manufacturing cost per unit: $9.75 Sales price per unit: $42.50 Fixed manufacturing overhead cost (per month for controllers): $81,000 Variable selling and administrative expenses per unit: $3.00 Fixed selling and administrative expenses (per month for controllers): $13,122
Instructions:
(a) Using this information for the controllers, determine the contribution margin ratio, the degree of operating leverage, the break-even point in dollars, and the margin of safety ratio for JTL MANUFACTURING Corporation on this product.
Explanation / Answer
Products Units sold Sales Mix Sales price Var Cost Var Selling Cost Contribution per unit Weighted Average contribution E A B C D=A-B-C F=Sumproduct(DE) / 100 Sprinklers 460000 23 26.5 13.96 1.3 11.24 258.52 Valves 1480000 74 11.2 7.95 0.5 2.75 203.5 Controllers 60000 3 42.5 29.75 3.41 9.34 28.02 100 4.90 Fixed Manufacturing Overhead 760000 Fixed Selling and administrative 1600000 Total Fixed Cost 2360000 BEP = Fixed Cost/W. Av contribution per unit 2360000/4.90 481633 Proof W Units S.Mix Units CM per Unit Total Contribution Sprinklers 481633 23 110,776 11.24 1245116.735 Valves 481633 74 356,408 2.75 980122.449 Controllers 481633 3 14,449 9.34 134953.4694 Recovery of Fc 2360192.653