Question

1.

Sales Mix and Break-Even Sales

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $468,000, and the sales mix is 60% bats and 40% gloves. The unit selling price and the unit variable cost for each product are as follows:

Products	Unit Selling Price		Unit Variable Cost
Bats	$60		$50
Gloves	150		90

a. Compute the break-even sales (units) for both products combined.
units

b. How many units of each product, baseball bats and baseball gloves, would be sold at break-even point?

Baseball bats	units
Baseball gloves	units

2.

Break-Even Sales

Anheuser-Busch InBev Companies, Inc., reported the following operating information for a recent year (in millions of dollars):

Net sales	$47,063
Cost of goods sold	$18,756
Selling, general and administration	12,999
	$31,755
Income from operations	$15,308*
*Before special items

In addition, assume that Anheuser-Busch InBev sold 400 million barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that Anheuser-Busch InBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $300 million.

When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to one decimal place.

a. Compute the break-even number of barrels for the current year.
million barrels

b. Compute the anticipated break-even number of barrels for the following year.
million barrels.

3.

a. Yountz Company budgets sales of $960,000, fixed costs of $17,300, and variable costs of $76,800. What is the contribution margin ratio for Yountz Company? (Enter your answer as a whole number.)
%

b. If the contribution margin ratio for Vera Company is 55%, sales were $583,000, and fixed costs were $234,070, what was the income from operations?
$

4.

Break-Even Sales and Sales to Realize Income from Operations

For the current year ending October 31, Yentling Company expects fixed costs of $694,400, a unit variable cost of $64, and a unit selling price of $96.

a. Compute the anticipated break-even sales (units).
units?

b. Compute the sales (units) required to realize income from operations of $160,000.
units?

Answer 1

Dragon Sports Inc. Anheuser-Busch InBev Companies, Inc. Requirement a Requirement a Unit Selling Price of E = ($60 x 60%) + ($150 x 40%) Unit Selling Price of E = $36 + $60 = $96 Unit Variable Cost of E = ($50 x 60%) + ($90 x 40%) Unit Variable Cost of E = $30 + $36 = $66 Unit Contribution Margin of E= $96 - $66 = $30 Total Fixed Cost = 18756*(1-0.75) + 12,999*(1-0.50) = $ 11188.50 Millions Variable Cost Per Unit = (31755 - 11188.50)/400 = 51.42 Selling Price Per Unit = 47063/400 = 117.66 Contribution Margin Per Unit = 117.66 - 51.42 = 66.24 Break-even number of barrels for the current year = Total Fixed Cost / Contribution Margin Per unit Break-even number of barrels for the current year = 11188500000/66.24 Break-even number of barrels for the current year = 168,908,515 Barrels Requirement b Requirement b 9,360 units of baseball bats (15,600 units x 60%) 6,240 units of baseball gloves (15,600 units x 40%) Breakeven units = 468000 / 30 = 15600 Total Fixed cost for the following year = $ 11188.50 Millions + 300 Million = 11488.50 Million Break-even number of barrels for the following year = Total Fixed Cost / Contribution Margin Per unit Break-even number of barrels for the following year = 11488500000/66.24 Break-even number of barrels for the following year = 173,437,500 Barrels Yentling Company Breakeven in Units = Fixed Cost / Contribution per unit = 694400 / (96-64) = 21700 units Yountz Company Contribution Margin = 960000 - 76800 = 883200 Contribution Margin Ratio = 960000 - 76800 = 883200/ 960000 = 92% Target Sales = (694400 + 160000)/( 96 - 64) = 854400 / 32 = 26700