Question

Problem 4-20 Sales Mix; Multi-Product Break-Even Analysis (L09] Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells three products—sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows: Sinks Mirrors Vanities Units 600 300 300 Percentage 508 258 25% Total 1,200 100% Product Percentage of total sales Sales Variable expenses Sinks 51% $412, 698.00 123, 809.40 Mirrors 30$ $244,200 100% 195,360 80% Vanities 198 $157,102.00 94, 261.20 Total 1008 $814,000.00 413,430.60 100% 30% 100% 60% 100% 51% Contribution margin $288,888.60 7 04 $ 48,840 20% $ 62,840.80 40% 400,569.40 498 Contribution margin per unit $ 481.48 $ 162.80 $ 209.47 Fixed expenses 362,600.00 Operating income $ 37,969.40

Required:

1. Prepare a contribution format income statement for the month based on actual sales data. (Round your percentage answers to the nearest whole number.)

Answer 1

Answer to Requirement 1: Sinks 34% 337,037 101,111 235,926 Percentage of total sales Sales Variable expenses Contribution margin Fixed expenses Operating income Product Mirrors 47% 455,840 364,672 91,168 $ 100% 30% 70% $ $ $ Vanities 19% 183,286 109,972 73,314 80% 20% 100% 60% 40% $ $ $ Total 100% 976,163 575,755 400,408 362,600 37,808 $ $ $ $ $ 100% 59% 41% 37% Answer to Requirement 2: Breakeven point in sales dollars = Fixed expenses / Contribution margin ratio Breakeven point in sales dollars = $362,600 / 0.41 Breakeven point in sales dollars = $884,390 Answer to Requirement 3: Weighted average contribution margin per unit = 0.34 * $481.48 +0.47 * $162.80 + 0.19 * $209.47 Weighted average contribution margin per unit = $280.0185 Breakeven point in unit sales - Fixed expenses/ Weighted average contribution margin per unit Breakeven point in unit sales = $362,600 / $280.0185 Breakeven point in unit sales = 1,295