Question

The Lazy J sells two types of harmocks Snoorest and The Shady Lady The following table provides information about each hammock The Lazy has $107.000 in fed costs Sales Price Variable costs per Hammock Sales Mix per Hammock Snoortest $ The Shady Lady $225 570 40 Since Snoorest is its bestseller The Lady is considering only seling that product and hang production and of The Shady Lady Calculate the breakpointing only Snoorefest sold What is The Lazy Is weighted average contribution margin assuming both products continue to be sold $ How many of each type of hammock does The Lazy J need to sell in order to achieve its goal of $375.000 in operating income this year? Total Hammocks to be sold Snoorefest Hammocks to be sold The Shady Lady Hammocks to be sold

Answer 1

Ans a) Break even point in units if only snoozefest is sold

BEP = Fixed Cost / (Sales price-Variable cos)

= $407,000 / (175-50)

= 3256 units

Ans : Need to sell 3256 units of snoozefest to break even.

b) Weighted Average Contribution Margin

= (Contribution of shady lady * 0.40)+(Contribution of Snoozefest * 0.6)

={ (225-70) * 0.4 } + { ( 175-50 ) * 0.6 }

= 62 + 75

= 137

Ans : The Weighted Average Contribution Margin is $137.

c) Units too be sold to achieve operating income of 375,000

Total units = (Operating Income + fixed cost) / Contribution per unit

= (375,000+407000) / 137

= 5,708 units

Snoozefest = 5708 * 0.6 = 3425 unis

The shady lady = 5,708 * 0.4 = 2283 units