Question

please complete all 9 parts and highlight answers. Thank you

Keyz 1-2-3 is a top-selling electronic spreadsheet product Keyz is about to release version 5.0. It divides its customers into two groups: new customers and upgrade customers (those who previously purchased Keyz 1-2-3.4.0 or earlier versions). Although the same physical product is provided to each customer group, sizable differences exist in soling prices and variable marketing costs (Click the icon to view the price and cost information) The fixed costs of Keyz 1-2-3 5.0 are $15.000.000. The planned sales mix in units is 60% new customers and 40% upgrade customers Read the requirements Requirement 1. What is the keyz 1-2-3 5.0 breakeven point in units, assuming that the planned 60%/40% sales mi is attained? Begin by determining the sales mo. For every bundle Y units are sold to new customers, and units are sold to customer who bought upgrades. i Requirements Data Table 1 - X 2 1. Customers 4 Upgrade Customers $ 100 2 $ 275 2 Selling price Variable costs Manufacturing Marketing What is the key 1-2-3 5.0 breakeven point in units, assuming that the planned 60% 40% sales mix is attained If the sales mix is attained what is the operating income when 220.000 total units are sold? Show how the breakeven point in units changes with the following customer micos a. New 40% and upgrade 60% b. New 80% and upgrade 20% c. Comment on the results $ 35 65 $ 100 35 15 Click to select your answer 50 50 $ 175 Contribution margin 9 parts remaining hp ? 8 % 8 9 O $ 4 6 2 3 a P Y U T E 3 R

Answer 1

Answer

1 Break even point in unit = fixed cost / weighted average contribution margin

Weighted average contribution margin

= (contribution margin per unit of new customers × sales mix of new customers) + (contribution margin per unit of upgrade customers × sales mix of upgrade customers)

= (175 × 60%) + (50 × 40%) = $125

Break even point in unit

= 15,000,000 / 125 = 120,000 units

Keys total break even quantity is 120,000 units .

Break even quantity of new customers

= 120,000 × 60% = 72,000 units

Break even quantity of upgrade customers

= 120,000 × 40% = 48,000 units

2 total units sold is 220,000

Units sold in new customers

= 220,000 × 60% = 132,000 units

Units sold in upgrade customers

= 220,000 × 40% = 88,000 units

Contribution margin from new customer for 132,000 units

= 132,000 × 175 = $23,100,000

Contribution margin from upgrade customer for 88,000 units

= 88,000 × 50 = 4,400,000

Total contribution margin from new customer and upgrade customers

= 23,100,000 + 4,400,000 = $27,500,000

Operating income

= total contribution margin - fixed cost

= 27,500,000 - 15,000,000 = $12,500,000

Operating income is $12,500,000

3 a Weighted average contribution margin

= (175 × 40%) + (50 × 60%) = $100

Break even quantity of keyz

= 15,000,000 / 100 = 150,000 units

Break even quantity of new customers

= 150,000 × 40% = 60,000 units

Break even quantity of upgrade customers

= 150,000 × 60% = 90,000 units

b weighted average contribution margin

= (175 × 80%) + (50 × 20%) = $150

Break even quantity of keyz

= 15,000,000 / 150 = 100,000 units

Break even quantity of new customers

= 100,000 × 80% = 80,000 units

Break even quantity of upgrade customers

= 100,000 × 20% = 20,000 units

c The sales mix is 40% and 60% the total break even quantity of keyz is 150,000 units , the break even quantity of new customers is 60,000 units and upgrade customers is 90,000 units.

The sales mix is 80% and 20% , total break even quantity is 100,000 units . The break even quantity of new customers is 80,000 units and upgrade customers is 20,000 units.

* keyz need to sell more unit (150,000) in 40% , 60% sales mix compared to 80% ,20% sales mix to break even.

* keyz need to sell more new customers units (80,000) in sales mix 80%, 20% compared to 40%,60% sales mix to break even.

* keyz needs to sell more units of upgrade customers (90,000 units) in 40%,60% sales mix compared to 80%,20% sales mix to break even.

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