Homework Answers
| (a) Calculation of Anticipated Level of Profits | ||||||
| Particulars | AU | NZ | ||||
| Selling Price Per Unit (1) | 520 | 520 | ||||
| Variable Per Unit (2) | 220 | 260 | ||||
| Contribution Margin Per Unit (3= 1-2) | 300 | 260 | ||||
| Expected Units sold per year (4) | 50,000 | 75,000 | ||||
| Total Contribution Margin (5 = 3*4) | 15,000,000 | 19,500,000 | ||||
| Net Profit = Total Contribution Margin from AU +Total Contribution Margin from NZ - Total Fixed Cost | ||||||
| Net Profit = $ 150,00,000 + $ 19,500,000 - $ 20,148,000 | ||||||
| Net Profit = $ 14,352,000 | ||||||
| (b) Calculation of Break Even Point | ||||||
| Break Even Point = Total Fixed Cost/ Weighted Average Contribution Margin | ||||||
| Total Fixed Cost = $ 20,148,000 | ||||||
| Weighted Average Contribution Margin = 276 ( Note 1) | ||||||
| Break Even Point = 20,148,000/ 276 | ||||||
| Break Even Point = 20,148,000/ 276 | ||||||
| Break Even Point = 73,000 Units | ||||||
| With the same product mix the units number of AU and NZ to be sold for break even are | ||||||
| Numbers of Units for AU = Break Even Units * Weights = 73000 * 0.4 - 29,200 Units | ||||||
| Numbers of Units for NZ = Break Even Units * Weights = 73000 * 0.6 - 43,800 Units | ||||||
| Note 1 | ||||||
| Weighted Average Contribution Margin | ||||||
| Particulars | AU | NZ | ||||
| Contribution Margin Per Unit | 300 | 260 | ||||
| Expected Units sold per year | 50,000 | 75,000 | ||||
| Weights (Number of Indiviual Units Sold/ Total Numbers of Units) | 0.40 | 0.60 | ||||
| 50,000 /(50,000+75,000) |
75,000/ (50,000+75,000) |
|||||
| Weighted Average Contribution Margin = (Weight of AU * Contribution Margin Per AU) + (Weight of NZ * Contribution Margin Per NZ) | ||||||
| Weighted Average Contribution Margin = (0.4 * 300) + (0.6 * 260) | ||||||
| Weighted Average Contribution Margin = 276 | ||||||
| (b) Calculation of New Break Even Point | ||||||
| Break Even Point = Total Fixed Cost/ Weighted Average Contribution Margin | ||||||
| Total Fixed Cost = $ 20,148,000 | ||||||
| Weighted Average Contribution Margin = 292 ( Note 2) | ||||||
| Break Even Point = 20,148,000/ 292 | ||||||
| Break Even Point = 20,148,000/ 292 | ||||||
| Break Even Point = 69,000 Units | ||||||
| With the same product mix the units number of AU and NZ to be sold for break even are | ||||||
| Numbers of Units for AU = Break Even Units * Weights = 69000 * 0.8 - 55,200 Units | ||||||
| Numbers of Units for NZ = Break Even Units * Weights = 69000 * 0.2 - 13,800 Units | ||||||
| 4 Pair Sunglasses AU for 1 Pair of Sunglasses NZ | ||||||
| Note 2 | ||||||
| Particulars | AU | NZ | ||||
| Contribution Margin Per Unit | 300 | 260 | ||||
| Expected Units ( 4:1) | 4 | 1 | ||||
| Weights (Number of Indiviual Units Sold/ Total Numbers of Units) | 0.80 | 0.20 | ||||
| (4 /(4+1) | (1 /(4+1) | |||||
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