Question

The

StackpoleStackpole

Company retails two​ products: a standard and a deluxe version of a luggage carrier. The budgeted income statement for next period is as​ follows:

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​(Click the icon to view the budgeted income​ statement.)Read the requirements

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.

Requirement 1. Compute the breakeven point in​ units, assuming that the company achieves its planned sales mix.

Begin by determining the sales mix. For every 1 deluxe unit(s) sold,

standard units are sold.

Determine the formula used to calculate the breakeven point when there is more than one product sold.​ Then, enter the amounts in the formula to calculate the breakeven point.

/

=

Breakeven point in bundles

/

=

The breakeven point is

standard units and

deluxe units.

Requirement 2. Compute the breakeven point in units​ (a) if only standard carriers are sold and​ (b) if only deluxe carriers are sold.

(a) If only standard carriers are sold, the breakeven point is

units.

(b) If only deluxe carriers are sold, the breakeven point is

units.

Requirement 3. Suppose

240 comma 000240,000

units are sold but only

40 comma 00040,000

of them are deluxe. Compute the operating income. Compute the breakeven point in units. Compare your answer with the answer to requirement 1. What is the major lesson of this​ problem?Compute the operating income if

240 comma 000240,000

units are sold but only

40 comma 00040,000

of them are deluxe.

	Standard Carrier	Deluxe Carrier	Total
Units sold
Revenues at $30 and $38 per unit
Variable costs at $24 and $28 per unit
Contribution margin
Fixed costs
Operating income

Before calculating the breakeven​ points, determine the new sales mix.

For every 1 deluxe carrier sold,

standard carriers are sold.

Compute the breakeven point in​ units, assuming the new sales mix. ​(Round your answers up to the next whole​ number.)

The breakeven point is

standard units and

deluxe units.

Compare your answer with the answer to requirement 1. What is the major lesson of this​ problem?

The major lesson of this problem is that changes in the sales mix change

▼

breakeven points and operating incomes

neither breakeven points nor operating incomes

only breakeven points

only operating incomes

. In this​ example, the budgeted and actual total sales in number of units were​ identical, but the proportion of the product having the

▼

higher

lower

contribution margin declined. Operating income

▼

improved

stayed the same

suffered

and the breakeven point

▼

fell

rose

stay

ed the same

.

Standard Carrier

Deluxe Carrier

Total

Units sold

180,000

60,000

240,000

Revenues at $30 and $38 per unit

$5,400,000

$2,280,000

$7,680,000

Variable costs at $24 and $28 per unit

4,320,000

1,680,000

6,000,000

Contribution margins at $6 and $10 per unit

$1,080,000

$600,000

1,680,000

Fixed costs

1,050,000

Operating income

$630,000

1.	Compute the breakeven point in​ units, assuming that the company achieves its planned sales mix.
2.	Compute the breakeven point in units​ (a) if only standard carriers are sold and​(b) if only deluxe carriers are sold.
3.	Suppose 240 comma 000240,000 units are sold but only 40 comma 00040,000 of them are deluxe. Compute the operating income. Compute the breakeven point in units. Compare your answer with the answer to requirement 1. What is the major lesson of this​problem?

Answer 1

1) Breakeven point in units = fixed cost / Weighted average contribution per unit mix
first we calculate Weighted Average contribution :
	Standard	Deluxe	Total
Product mix	18/24=75%	6/24=25%	100%
SP	30	38
VC	24	28
Contribution	6	10
WA Contribution	4.5	2.5	7
Fixed Cost = 1050000
Breakeven point in units = 1050000 / 7 = 150000 units
2a) BEP if Standard carriers are only sold : 1050000 / 6 = 175000 units
2b) BEP if Deluxe carriers are only sold : 1050000 / 10 = 105000 units
3) If 200000 units of standard and 40000 units of deluxe are sold, then
	Standard	Deluxe	Total
Product mix	20/24=83.33%	4/24=16.67%	100%
SP	30	38
VC	24	28
Contribution	6	10
WA Contribution	5	1.67	6.67
Fixed Cost = 1050000
Operating Income = (200000 * 6) + (40000 * 10) - 1050000 = 550000
Breakeven point in units = 1050000 /6.67 = 157421.29 units