Question

Hello! Can someone explain how to solve this problem? I could not solve it and need to in order to move forward with the assignment.
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Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 20,800 portable grills, 52,000 stationary grills, and 5,200 smokers. Information on the three models is as follows: Portable Stationary Smokers Price $86 $200 $252 Variable cost per unit 44 128 139 Total fixed cost is $2,182,180. Required: 1. What is the sales mix of portable grills to stationary grills to smokers? 2. Compute the break-even quantity of each product. 3. Prepare an income statement for Texas-Q for the coming year. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. Enter the contribution margin ratio as a percentage rounded to two decimal places; round the break-even sales revenue to the nearest dollar. 4. Compute the margin of safety for the coming year.

Answer 1

1.

	Portable Grills	Stationery Grills	Smokers
Sell	20800	52000	5200
Sales Mix	4	10	1
Sales Mix of Portable grills to stationery grills to smokers is 4:10:1

2.

Portable Grills	8720
Stationery Grills	21800
Smokers	2180

Working:

Particular	Portable Grills	Stationery Grills	Smokers	Total
Selling Price per unit	$                    86.00	$                  200.00	$                252.00
Variable Cost per unit	$                    44.00	$                  128.00	$                139.00
Contribution per unit	$                    42.00	$                    72.00	$                113.00
Sales Mix	4	10	1
Total Contribution Margin	$                 168.00	$                  720.00	$                113.00	$            1,001.00

Break even unit = Fixed Cost / Contribution Margin

Break even unit = 2182180 /1001

Break even units = 2180 units

Particular	Portable Grills	Stationery Grills	Smokers
Break Even units	2180	2180	2180
Sales Mix	4	10	1
Break even quantity	8720	21800	2180

3a.

Contribution Margin Ratio = 38.56%

Break Even Revenue = $5,659,180

Working:

Particular	Portable Grills	Stationery Grills	Smokers	Total
Sales Revenue	$      1,788,800.00	$     10,400,000.00	$     1,310,400.00	$   13,499,200.00
Less: Variable Cost	$          915,200.00	$       6,656,000.00	$        722,800.00	$     8,294,000.00
Contribution Margin	$          873,600.00	$       3,744,000.00	$        587,600.00	$     5,205,200.00
Less: Fixed Cost				$     2,182,180.00
Operating Income				$    3,023,020.00

Contribution Margin Ratio = Contribution Margin / Sales Revenue

Contribution Margin Ratio =$5205,200 / 13,499,200 *100

Contribution Margin Ratio = 38.56%

Break Even Revenue = Fixed Cost / Contribution Margin Ratio

Break Even Revenue = 2182180/38.56%

Break Even Revenue = $5,659,180

3b.

Income Statement
Sales Revenue	$    13,499,200.00
Less: Variable Cost	$      8,294,000.00
Contribution Margin	$      5,205,200.00
Less: Fixed Cost	$      2,182,180.00
Operating Income	$      3,023,020.00

4.

Margin of Safety = Sales - Break even Sale Revenue

Margin of Safety = 13,499,200 - 5,659,180

Margin of Safety = $7840020