Question 3 Travel On Inc. sells luggage. they sell a duffle bag, a carry-on suitcase and...
Question 3
Travel On Inc. sells luggage. they sell a duffle bag, a carry-on suitcase and a deluxe suitcase. The price and variable cost for each type of luggage is listed below.
Price Variable Cost
Duffle Bag R100 R25
Carry-on R180 40
Deluxe 300 120
“The total fixed costs for Travel On Inc. equals R60,000. For every 8 duffle bags, Travel On Inc sells it sells 3 carry-on suitcases and 1 deluxe suitcase. “ with the following
The total fixed costs for Travel On Inc. equals R60,000. For every 8 duffle bags. Travel On Inc sells, 3 carry-on suitcases and 1 deluxe suitcase are sold.
Required:
1.) Calculate the package contribution margin.
2.) Calculate the break-even point in units for duffle bags, carry-on suitcases and deluxe suitcases.
3.) If Travel On Inc. has a target income for the coming year of R300,000, how many packages will the company have to sell?
4.) Based on your answer in Part C, prepare a contribution margin income statement for the coming year.
5.) What is the company’s margin of safety in packages?
Homework Answers
Solutions
1. Package contribution margin is 1200
2. Break even point in units for
Duffle bag 400 units
Carry on suitcase. 150 units
Deluxe suitcase. 50 units
3. Number of packages to be sold is 300 packages in order to achieve the target income of 300000
4. Income statement is in workings attached below
5. Margin of safety is 410000
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