Question

1. Steinberg Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Steinberg expects to sell 80,000 regular models and 16,000 deluxe models. A segmented income statement for the two products is as follows:

   		Regular Model		Deluxe Model		Total
   Sales		$12,000,000		$10,880,000		$22,880,000
   Less: Variable costs		7,200,000		6,528,000		13,728,000
   Contribution margin		$4,800,000		$4,352,000		$9,152,000
   Less: Direct fixed costs		1,200,000		960,000		2,160,000
   Segment margin		$3,600,000		$3,392,000		$6,992,000
   Less: Common fixed costs						1,386,400
   Operating income						$5,605,600

   Required:

   1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit.

   Regular models	units
   Deluxe models	units

   2. Using information only from the total column of the income statement, compute the sales revenue that must be generated for the company to break even. Round the contribution margin ratio to four decimal places. Use the rounded value in the subsequent computation. (Express as a decimal-based amount rather than a whole percentage.) Round the amount of revenue to the nearest dollar.

   Contribution margin ratio
   Revenue	$

Answer 1

Contribution margin per model:

Regular = 4,800,000/80,000 =$60

Deluxe = 4,352,000/16,000 =$272

Break even units = fixed costs/contribution margin per unit

Regular = 1,200,000/60 = 20,000 units

Deluxe = 960,000/272 =3,529 units

2. Contribution margin ratio = contribution margin/sales revenue

= 9,152,000/22,880,000

=40%

Break even sales revenue = total fixed costs/contribution margin ratio

= 3,546,400/40%

=$8,866,000