Question

Same question but for these Values (See data table screen shot)

i Data Table Sales Price to Retail Country Outlets Variable Annual Variable Marketing and Fixed Manufacturing Cost Distribution Cost Costs per Area Rug per Area Rug 9,394,000 $ 70.00 $ 56.00 5,775,000 65.00 47.00 22,050,000 70.00 63.00 Italy France 280.00 $ 280.00 280.00 Singapore Print Done

Comfy Carpets ​Inc., is considering three possible countries for the sole manufacturing site of its newest area​ rug:

ItalyItaly​,

FranceFrance​,

and

SingaporeSingapore.

All area rugs are to be sold to retail outlets in the United States for

$ 280$280

per unit. These retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit​ (area rug) differ in the three countries.

LOADING...

​(Click the icon to view the cost​ data.)Read the requirements

LOADING...

.

Requirement 1. Compute the breakeven point for

Comfy CarpetsComfy Carpets​,

​Inc., in each country in​ (a) units sold and​ (b) revenues.

Determine the formulas for the breakeven point in units and the breakeven point in revenues. Begin with the breakeven point in​ units, then the breakeven point in revenues.

Fixed costs

/

Contribution margin per unit

=

Breakeven point in units

Breakeven point in units

x

Sales price per unit

=

Breakeven point in revenues

Compute the breakeven point for

Comfy CarpetsComfy Carpets​,

​Inc., in each country in​ (a) units sold and​ (b) revenues using the formulas you determined above.

		Italy
(a)	Breakeven point in units	61,000
(b)	Breakeven point in revenues	$17,080,000

France

34,375

$9,625,000

Singapore

150,000

$42,000,000

Requirement 2. If

Comfy CarpetsComfy Carpets​,

​Inc., plans to produce and sell

90 comma 00090,000

rugs in

20142014​,

what is the budgeted operating income for each of the three manufacturing​ locations? Comment on the results.

Determine the formula to calculate the operating income or loss.

Revenues

-. .

Variable costs

-

Fixed costs

=

Operating income (loss)

Another way to solve for the operating income or loss​ is:

(

Contribution margin per unit

x. .

Units sold

) -

Fixed costs

=

Operating income (loss)

Compute the budgeted operating income or loss for

Comfy CarpetsComfy Carpets​,

​Inc., in each country if the company produces and sells

90 comma 00090,000

area rugs in

20142014.

​(Use parentheses or a minus sign when entering operating​ losses.)

	Italy
Budgeted operating income	$4,466,000

France

$9,345,000

Singapore

$(8,820,000)

France

has the lowest breakeven points since it has the

lowest

fixed costs and the

lowest

variable cost per unit.​ Therefore, at any given selling price

France

will always have the highest operating income.

SingaporeSingapore​'s

breakeven point is

higher

than the budgeted sales in

20142014​,

therefore an

operating loss

is budgeted.

Answer 1

	Italy	France	Singapore
Selling price per unit	280	280	280
Variable manufacturing cost per unit	70	65	70
Variable marketing and dsitribution cost per unit	56	47	63
Contribution Margin per Unit	154	168	147
CM Ratio = Contribution Margin/Sales	55.00%	60.00%	52.50%
Contribution Margin per unit = Selling price per unit - variable costs per unit
Break even point in units = Fixed costs/CM per unit
	Italy	France	Singapore
Fixed costs	9,394,000	5,775,000	22,050,000
Contribution Margin per Unit	154	168	147
Break even point in units	61,000	34,375	150,000
Break even point in revenues = Fixed costs/CM ratio	17,080,000	9,625,000	42,000,000
Operating Income = Sales - Variable costs - Fixed costs
or Contribution margin per unit*Units sold - Fixed costs
	Italy	France	Singapore
Budgeted Operating Income	4,466,000	9,345,000	(8,820,000)
France has lowest break even point
Lowest
Lowest
France
Singapore has higher
operating loss