Question

PUDICIO Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to retail department stores throughout the country. The Standard set sells for $98, and the Deluxe set sells for $113. The variable expenses associated with each set are given below. Standard $ 34.00 $ 33.32 Deluxe $49.00 $38.42 Variable production costs Sales commissions (34% of sales price) The company's fixed expenses each month are: Advertising Depreciation Administrative $ 124,80 $ 27,400 $ 72,500 Mary Parsons, the financial vice president, watches sales commissions carefully and has noted that they have risen steadily over the last year. For this reason, she was shocked to find that even though sales have increased, profits for the current month-May-are down substantially from April. Sales, In sets for the last two months are given below: Next > 4 of 12 < Prey

Answer 1

Answer-1(a):

Carbex, Inc. Contribution Income Statement for April Standard Deluxe 578,200 100 % 440,700 Total 1,018,900 100 % 100 % 200,600 196,588 397,188 181,012 34.69 % 34.00 % 68.69 % 31.31 % 191,100 149,838 340,938 99,762 43.36 % 34.00 % 77.36 % 22.64 % 391,700 346,426 738,126 280,774 38.44 % 34.00 % 72.44 % 27.56 % Sales Variable expense:. Production cost Sales commission Total variable expense Contribution margin Fixed expense: Advertising Depreciation Administrative Total fixed expenses Net Income 124,000 27,400 72,500 223,900 56,874

Answer-1(b):

Carbex, Inc. Contribution Income Statement for May Standard Deluxe 284,200 100 % 779,700 Total 1,063,900 100 % 100 % | 98,600 96,628 195,228 88,972 34.69 % 34.00 % 68.69 % 31.31 % 338,100 265,098 603,198 176,502 43.36 % 34.00 % 77.36 % 22.64 % 436,700 361,726 798,426 265,474 41.05 % 34.00 % 75.05 % 24.95 % Sales Variable expense:. Production cost Sales commission Total variable expense Contribution margin Fixed expense: Advertising Depreciation Administrative Total fixed expenses Net Income 124,000 27,400 72,500 223,900 41,574

Answer-3(a):

Sales mix ratio Selling price Total variable expenses Contribution margin Standard Deluxe Weighted Avg 60.20 39.80 98.00 113.00 103.97 67.32 8 7.42 75.32 30.68 25.58 28.65

Break even point = $223,900 / 28.65 = 7,815 units

The company will have to sell 7,815 units to break-even. Now I would compute the number of units of each product to be sold:

Product Standard (7,815 × 60.20%): 4,704.6 units
Product Deluxe (7,815 × 39.80%): 3,110.4 units

As the number of units of each individual product to be sold have been computed, I can compute the break even point in dollars as follows:

Product Standard (4,704.6 * $98)	461,050.8
Product Deluxe (3,110.4 * $113)	351,475.2
Break even point in dollar sales	$       812,526