Question

Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data. Pairs of Shoes Pairs of Gloves Range- Finder Unit sales price $100 $30 $260 Unit variable costs 60 10 200 Unit contribution margin $40 $20 $60 Sales mix 35 % 55 % 10 % Fixed costs are $620,000. Verify that the mix of sales units to be sold at the break-even point for each product line will generate a zero net income. Tiger Golf Accessories CVP Income Statament Please create CPV income Statement

Answer 1

Answer

• All working forms part of the answer
• Working #1: Weighted Average contribution per unit

Working		Pair of Shoes	Pai of Gloves	Range Finder
A	Contribution per unit	$                                           40.00	$                           20.00	$                                              60.00
B	Sales Mix	35%	55%	10%
C = A x B	Weighted Average Contribution margin per unit	$                                           14.00	$                           11.00	$                                                6.00

• Working #2

Break Even point total, an individual

A	Total Fixed Cost	$                                 620,000.00
B = 14 + 11 + 6	Total Weighted average contribution margin per unit	$                                           31.00
C = A/B	No. of Units to Break Even	20,000
D = C x 35%	No. of Shoes to Break Even	7,000
E = C x 55%	No. of Gloves to Break Even	11,000
F = C x 10%	No. of Range Finder to Break Even	2,000

• Working #3: Amount of Sales and Variable cost at Break Even

Working		Pair of Shoes	Pai of Gloves	Range Finder
A	Units to be sold to Break Even	7,000	11,000	2,000
B	Sale price per unit	$                                         100.00	$                           30.00	$                                           260.00
C =A x B	Total Sales Revenue	$                                 700,000.00	$                330,000.00	$                                   520,000.00
D	Variable cost per unit	$                                           60.00	$                           10.00	$                                           200.00
E = A x D	Total Variable cost	$                                 420,000.00	$                110,000.00	$                                   400,000.00

• Requirement: Verification that Sales Revenue generated from above calculated Break Even Level will generate zero Net Income

CVP Income Statement
	Pair of Shoes	Pai of Gloves	Range Finder	TOTAL
Sales revenue [See Working #3]	$                                 700,000.00	$                330,000.00	$                                   520,000.00	$   1,550,000.00
Variable cost [See Working #3]	$                                 420,000.00	$                110,000.00	$                                   400,000.00	$       930,000.00
Contribution margin	$                                 280,000.00	$                220,000.00	$                                   120,000.00	$       620,000.00
Fixed Cost				$       620,000.00
Net Income				$                        -