Question

1. Determine the number of units of each product the Kline must sell to break even, assuming the sales mix remains constant.

2.Determine the sales revenue needed to earn an after-tax profit of $1,625,000

3. Determine the number of units of each product that must be sold for Bline to achieve an after-tax profit of $1,300,000 (Rounding to the nearest dollar）

Product D 100 Operating information for four different products sold by Kline Company follows: Product A Product B Product C Units sold 1.000 600 300 Sales $500,000 $1,080,000 $2,760,000 Variable product costs 300,000 630,000 1,650,000 Identifiable fixed product costs 25,000 220,000 300,000 Variable selling/administrative 25,000 150,000 240,000 Identifiable fixed selling/administrative 64.200 50,000 50,000 $3,600,000 2,350,000 300,000 213,000 150,000 Common fixed costs are $270,000 and the income tax rate is 35%.

Answer 1

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Answer 3 Workings Required after tax profit Required before tax profit Add: Total fixed cost Target contribution Weighted Average Contribution Ma Sales units needed to achieve Targ Amount $ 1,300,000.00 2,000,000.00 1,429,200.00 3,429,200.00 1,191.00 2,879.26 Note N 0=N/65% See H P=H+O See L Q=P/L L PE Sales Mix Ratio Calculation of sales revenue Product A Product B Product C Product D Total sales revenue Selling price 500.00 1,800.00 9,200.00 36,000.00 0.50 0.30 0.15 0.05 This is calculated as 2,879.26 units * Sales Mix Ratio Sales Units Sales revenue 1,439.63 719,815.28 863.78 1,554,801.01 431.89 3,973,380.35 143.96 5,182,670.03 2,879.26 11,430,667.00 Total Proof of answer 3 Product A Selling price 500.00 Variable cost per unit 325.00 Contribution Margin (CM) per unit 175.00 Number of Units 1,439.63 Contribution Margin (CM) 251,935.35 Total Fixed cost Operating Income Less: tax at 35% Profit after tax Product B 1,800.00 1,300.00 500.00 863.78 431,889.17 Product C 9,200.00 6,300.00 2,900.00 431.89 1,252,478.59 Product D 36,000.00 25,630.00 10,370.00 143.96 1,492,896.89 3,429,200.00 1,429,200.00 2,000,000.00 700,000.00 1,300,000.00

Kline Company
Workings
Calculation of sell price per unit
	Product A	Product B	Product C	Product D	Note
Sales	500,000.00	1,080,000.00	2,760,000.00	3,600,000.00	A
Units sold	1,000.00	600.00	300.00	100.00	B
Selling price	500.00	1,800.00	9,200.00	36,000.00	C=A/B
Calculation of Variable cost per unit	Product A	Product B	Product C	Product D	Note
Variable product cost	300,000.00	630,000.00	1,650,000.00	2,350,000.00	D
Variable selling/ administrative	25,000.00	150,000.00	240,000.00	213,000.00	E
Total Variable cost	325,000.00	780,000.00	1,890,000.00	2,563,000.00	F=D+E
Units sold	1,000.00	600.00	300.00	100.00	See B
Variable cost per unit	325.00	1,300.00	6,300.00	25,630.00	G=F/B
Calculation of total fixed cost	Product A	Product B	Product C	Product D	Total	Note
Identifiable fixed product costs	25,000.00	220,000.00	300,000.00	300,000.00	845,000.00
Identifiable fixed selling/ administrative	64,200.00	50,000.00	50,000.00	150,000.00	314,200.00
Common Fixed costs					270,000.00
Total fixed cost					1,429,200.00	H

Break-even point in units = Total Fixed Cost / WACM

Break-even point in units = 1,429,200 / 1,191

Break-even point in units = 1,200 units

Proof of answer 1	Product A	Product B	Product C	Product D	Total
Selling price	500.00	1,800.00	9,200.00	36,000.00
Variable cost per unit	325.00	1,300.00	6,300.00	25,630.00
Contribution Margin (CM) per unit	175.00	500.00	2,900.00	10,370.00
Number of Units	600.00	360.00	180.00	60.00
Contribution Margin (CM)	105,000.00	180,000.00	522,000.00	622,200.00	1,429,200.00
Total Fixed cost					1,429,200.00
Operating Income					-

Answer 2
Workings	Amount $	Note
Required after tax profit	1,625,000.00	I
Required before tax profit	2,500,000.00	J=I/65%
Add: Total fixed cost	1,429,200.00	See H
Target contribution	3,929,200.00	K=H+J
Weighted Average Contribution Margin (WACM)	1,191.00	See L
Sales units needed to achieve Target contribution	3,299.08	M=K/L

			This is calculated as 3,299 units * Sales Mix Ratio
Calculation of sales revenue	Selling price	Sales Mix Ratio	Sales Units	Sales revenue
Product A	500.00	0.50	1,649.54	824,769.10
Product B	1,800.00	0.30	989.72	1,781,501.26
Product C	9,200.00	0.15	494.86	4,552,725.44
Product D	36,000.00	0.05	164.95	5,938,337.53
Total sales revenue			3,299.08	13,097,333.33

Proof of answer 2	Product A	Product B	Product C	Product D	Total
Selling price	500.00	1,800.00	9,200.00	36,000.00
Variable cost per unit	325.00	1,300.00	6,300.00	25,630.00
Contribution Margin (CM) per unit	175.00	500.00	2,900.00	10,370.00
Number of Units	1,649.54	989.72	494.86	164.95
Contribution Margin (CM)	288,669.19	494,861.46	1,435,098.24	1,710,571.12	3,929,200.00
Total Fixed cost					1,429,200.00
Operating Income					2,500,000.00
Less: tax at 35%					875,000.00
Profit after tax					1,625,000.00

Answer 3
Workings	Amount $	Note
Required after tax profit	1,300,000.00	N
Required before tax profit	2,000,000.00	O=N/65%
Add: Total fixed cost	1,429,200.00	See H
Target contribution	3,429,200.00	P=H+O
Weighted Average Contribution Margin (WACM)	1,191.00	See L
Sales units needed to achieve Target contribution	2,879.26	Q=P/L