Question

Decision Making 6.1 a-d, e1 Current Designs manufactures two different types of kayaks: rotomoulded kayaks and composite kayaks. The following information is available for each product line. Sales price/unit Variable costs/unit Rotomoulded Composite $1,000 $2,000 600 1,340 The company's fixed costs are $849,760. An analysis of the sales mix identifies that rotomoulded kayaks make up 80% of the total units sold. Determine the weighted average unit contribution margin for Current Designs. Weighted average unit contribution margint LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Determine the break-even point in units for Current Designs and identify how many units of each type of kayak will be sold at the break-even point. (Round answers to o decimal places, e.g. 5,275.) Break-even sales units Rotomoulded Kayaks Composite Kayaks units units Units by each type of kayak LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT Assume that the sales mix changes, and rotomoulded kayaks now make up 70% of total units sold. Calculate the total number of units that would need to be sold to earn a net income of $2,080,380 and identify how many units of each type of kayak will be sold at this level of income. (Round answers to O decimal places, e.g. 5,275.) Required sales units Rotomoulded Kayaks Composite Kayaks units units Units by each type of kayak LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT LINK TO TEXT

Answer 1

a)

	Rotomoulded	Composite
Selling price per unit	$1,000	$2,000
Less: Variable cost per unit	($600)	($1,340)
Contribution per unit	$400	$660
Product Mix	80%	20%
Weighted Average Unit contribution margin	$320	$132	$452

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b)

Fixed cost	$849,760
Weighted Average Unit contribution margin	$452
Breakeven units ($849,760/$452)	1880
Rotomoulded (1,880 units × 80%)	1504 units
Composite (1,880 units × 20%)	376 units

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c)

	Rotomoulded	Composite
Selling price per unit	$1,000	$2,000
Less: Variable cost per unit	($600)	($1,340)
Contribution per unit	$400	$660
Product Mix	70%	30%
Weighted Average Unit contribution margin	$280	$198	$478

Fixed cost = $849,760

Net Income = $2,080,380

Total no. of units to be sold = $2.080,380/$478

= 4352 units

Rotomoulded = 4352 $\times$ 70% = 3046

Composite = 4352 $\times$ 30% = 1306