Question

Answer the questions on an Execl Spreadsheet

х z 25% P3-16 Product Mix and CVP Analysis The Mix Company sells three products: X, Y, and Z. Budgeted sales by product and in total for the coming month are shown below: Product Total Percentage of total sales 40% 35% 100% Sales................ $32,000 100% $28,000 100% $20,000 100% $80,000 100% Variable expenses. ... 20,800 65 11,200 40 12,000 60 44,000 55 Contribution margin .. $11,200 35% $16,800 60% $ 8,000 40% 36,000 45% Fixed expenses.......... 26,325 Operating income.. $ 9,675 Break-even sales are budgeted as follows: $26,325 0.45 - = $58,500 Operating income is budgeted at $9,675. Assume the following actual sales for the month: Product Actual Sales $48,000 8,000 24.000

Answer 1

Solution 1. CONTRIBUTION INCOME STATEMENT ON INCOME STATEMENTS Total 10% Actual Sales proportion 60% Amount Actual Sales $ 48,000 less: Variable expenses $ 31,200 Contribution Margin $ 16,800 Fixed Expenses Actual Operating Income % 100% 65% 35% Amount $ 8,000 $ 3,200 $ 4,800 30% % Amount 100% $ 24,000 40% $ 14,400 60% $ 9,600 % Amount 100% $ 80,000 60% $ 48,800 40% $ 31,200 $ 26,325 $ 4,875 100% 61% 39% Solution 2. Break-even Sales point = Fixed Cost Contribution Margin % $ 26,325 39% $ 67,500 Solution 3. Company met its Budgeted sales of $80,000, But the Operating Income is $4,875 while budgeted $9,675 The reason for fall in Operating income is reduction in the Sales % of Product Y which had the highest Contribution margin %. Budgeted Proportion of Prod Y sales was 35% but the actual Sales were 10% Budgeted Break-even sales = Actual Break even Sales = Increase in Break-even Sales = $ $ $ 58,500 67,500 9,000 The Break-even point increases as the Contribution Margin decreases. Budgeted Contribution margjn is 45% while the Actual Contribution margin is 39% Solution 4. Statement showing Contribution Margin and Operating Income X Y Total Actual Sales proportion 40% 35% 25% Amount % Amount % Amount % Amount Sales $ 35,200 100% $ 30,800 100% $ 22,000 100% $ 88,000 less: Variable expenses $ 22,880 65% $ 12,320 40% $ 13,200 60% $ 48,400 Contribution Margin $ 12,320 35% $ 18,480 60% $ 8,800 40% $ 39,600 Fixed Expenses $ 26,325 New Operating Income $ 13,275 100% 55% 45%

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