Question

EZ Carry Corp. is the maker of high quality golf bags. The company currently has three different lines of bags, which it sells to sporting goods stores and golf shops throughout the world. EZ Carry sells a constant mix of 4 small bags for each medium-sized bag and 5 medium bags for each large-sized bag. Total fixed costs for the year are expected to be $2.027.544. Small Selling price per bag $100 Variable cost per bag $ 40 Medium $170 $115 Large $250 $160 The breakeven point in units (for the year) would be: (Round per-unit amounts to 3 decimal places; do not round other Intermediate calculations.) Multiple Choice O 25,911 small; 6,478 medium: 1.296 large. 0 23,503 small: 5.876 medium: 1176 large. 0 28.113 small: 7,026 medium: 1.406 large 29.608 small: 7.401 medium: 1.481 large.

Answer 1

Answer)

Calculation of number of bags for each size to break-even

Let the total number of large size bags be “y”

Since for each large size bag manufactured, the company manufactures 5 medium size bags, total number of medium size bags is 5y (i.e. 5 X y)

Since for each medium size bag manufactured, the company manufactures 4 small size bags, total number of small size bags is 20y (i.e. 5y X 4)

Particulars	Small	Medium	Large
Selling price per bag	$ 100	$ 170	$ 250
Variable cost per bag	$ 40	$ 115	$ 160
Contribution margin per bag	$ 60	$ 55	$ 90

Total contribution margin = (Contribution margin per small bag X number of small bags) + (Contribution margin per medium bag X number of medium bags) + (Contribution margin per large bag X number of large bags)

                                   = ($ 60 X 20y) + ($ 55 X 5y) + ($ 90 X y)

                                   = $ 1,200 y + $ 275y + $ 90y   

                                   = $ 1,565 y

At break-even sales,

Total contribution = Total Fixed cost

$ 1,565 y = $ 2,027,544

y = 1,295.55 units

Large Size Bags:

Total number of large size bags = 1,295.55 or 1,296 units

Therefore, total number of large size bags is 1,296 units.

Medium Size Bags:

Total number of medium size bags = 1,295.55 X 5

                                                                = 6,477.78 bags or 6,478 units (rounded off)

Therefore, total number of medium size bags is 6,478 units.

Small Size Bags:

Total number of small size bags = 1,295.55 X 20

                                                          = 25,911.11 or 25,911 units

Therefore, total number of small size bags is 25,911 units.

Therefore, the correct option is (a) 25,911 small bags, 6,478 medium bags, 1,296 large bags.