Cost-Volume-Profit Relationships
PROBLEM 3-22 Sales Mix; Multiproduct Break-Even Analysis [LO 3-9] Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products-sinks, mirrors, and vanities. Budgeted sales by product and in total for the
coming month are shown below:
Product
~[] Sinks Mirrors Vanities Total
– -· Percentage of total sales ……. . .. . 48% 20% 32%
Sales ……………… … .. .. . $240,000 100% $100,000 100% $160,000
Variable expenses … .. . .. ……. . 72,000 30% 80,000 80% 88,000 –
Contribution margin …… .. …… . $168,000 70% $ 20,000 20% $ 72,000 – —
Fixed expenses ……… …….. .
Net operating income …. … . . .. . .
_ Fixed expenses _ $223,600 _ Dollar sales to break-even – ~- • . –
0 ~~ – $430,000
ratiO .
As shown by these data, net operating income is budgeted at $36,400 for the month, and break-even sales at $430,000.
Assume that actual sales for the month total $500,000 as planned. Actual sales by product are: sinks, $160,000; mirrors , $200,000; and vanities, $140,000.
Required:
I. Prepare a contribution format income statement for the month based on actual sales data. Present the income statement in the format shown above.
2. Compute the break-even point in sales dollars for the month, based on your actual data. 3. Considering the fact that the company met its $500,000 sales budget for the month , the presi-
dent is shocked at the results shown on your income statement in (1) above. Prepare a brief memo for the president explaining why both the operating results and the break-even point in
sales dollars are different from what was budgeted.
PROBLEM 3-23 Sales Mix; Break-Even Analysis; Margin of Safety [LO 3-7, LO 3-9] Vueva Milenario SA, a company located in Toledo, Spain, manufactures and sells two models of
:;,)tmshed cutlery- Alvaro and Bazan. Present revenue, cost, and unit sales data for the ·~]ltlhuct5 appear below. All currency amounts are stated in terms of euros, which are indicated
lhe symbol €.
Alvaro Bazan
Selling price per unit …. . ……. . €4.00 €6.00 Variable expenses per unit ……. . €2.40 €1.20 Number of units sold monthly ….. . 200 units 80 units
expenses are €660 per month .
Reqwred:
Assuming the sales mix above, do the following: a. Prepare a contribution format income statement showing both euro and percent columns
for each product and for the company as a whole. b. Compute the break-even point in euros for the company as a whole and the margin of
safety in both euros and percent of sales. The company has developed another product, Cano, that the company plans to sell for €8 each. At thi s price, the company expects to sell 40 units per month of the product. The variable expense would be €6 per unit. The company’s fixed expenses would not change.
-·- 100%
100% $500,000
55% 240,000 –
45% 260,000 —
223,600
$ 36,400
[]
~
107
100% 48%
– 52%
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