(11)
Answer : (c) $ 429583
Step -1
Computation of Total contribution of company
Standard | Deluxe | Total company | |
Sales per unit | $ 80 | $ 100 | |
Less - Variable cost | |||
Variable production cost | $ ( 20) | $ ( 40) | |
Sales commoision | $ (16) | $ ( 20) | |
Contribution per unit(a) | $ 44 | $ 40 | |
Number of unit sold (b) | 5000 | 3500 | |
Total contribution (a)*(b) | $ 220000 | $ 140000 | $ 360000 |
Step -2
Contribution ratio of Harrington's Inc = Contribution*100 / Sales
= $ 360000*100 / $ 750000
= 48 %
Total sales of company = $ 80*5000 + $ 100 *3500
= $ 400000 + $ 350000
= $ 750000
Step -3
Break even revenue of Harrington's Inc = Total Fixed cost / Contribution ratio
= $ 206200 / 48 %
= $ 429583
(12)
Answer : (c) $ 83000
Step -1
Computation of current income
Current Income = Contribution - Fixed cost
= $ 360000 - $ 206200
= $ 153800
Step -2
Computation of Fixed salary of sales personnel
Sales - variable cost - Fixed cost = desired profit
$ 750000 - $ 307000 - ($ 206200 + Fixed salary )= $ 153800
$ 750000 - $ 307000 - $ 206200 - Fixed salary = $ 153800
$ 236800 - Fixed salary = $ 153800
Fixed salary = $ 83000
So , Fixed salary of sales personnel = $ 83000
Working note -1
Computation of total variable cost
Standard | Deluxe | Total company | |
Variable production cost | $ 20 | $ 40 | |
Sales commission |
$ 6.40 ( $ 80*8 %) |
$ 10 ( $ 100*10 % ) |
|
Total variable cost per unit | $ 26.40 | $ 50 | |
Number of unit sold | 5000 | 3500 | |
Total variable cost | $ 132000 | $ 175000 | $ 307000 |
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