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		$106			$30			$245
Unit variable costs		61			11			202
Unit contribution margin		$45			$19			$43
Sales mix		33	%		41	%		26	%

Fixed costs are $652,726.

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 by creating a CVP INCOME STATEMENT

Tiger Golf Accessories CVP Income Statament
		$
				$
				$
				$

Answer 1

Required:

• Total weighted-average unit contribution margin = ($45 * 33%) + ($19 * 41%) + ($43 * 26%)

= $14.85 + $7.79 + $11.18

= $33.82

• Break-even point = Fixed cost / weighted-average unit contribution margin

= $652,726 / $33.82

= 19,300 units.

• Number of units sold at Break-even point

Shoes = (19,300 * 33%) = 6,369 units

Gloves = (19,300 * 41%) = 7,913 units

Range finder = (19,300 * 26%) = 5,018 units.

• Income statement:

Sales of shoes (19,300 * 33%) * $106	$675,114
Sales of gloves (19,300 * 41%) * $30	$237,390
Sales of range finder (19,300 * 26%) * $245	$1,229,410
Total sales		$2,141,914
(-) Variable cost:
(6,369*61) + (7,913*$11) + (5,018*$202)		($1,489,188)
Contribution margin		$652,726
(-) Fixed cost		($652,726)
Net income		$0