Question

Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells three products-sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows: Units Percentage 50% Sinks 600 Mirrors 300 258 Vanities 300 25% Total 1,200 1008 Product Sinks Mirrors Vanities Total Percentage of total sales Sales 50% 30% 20% 100% $98,010.00 53,905.50 $145,200 $484,000.00 242,302.50 $240,790.00 1008 100% 1008 100% Variable expenses 72,237.00 30% 116,160 80% 55% 50% Contribution margin $ 29,040 $168,553.00 708 20% $44,104.50 458 241,697.50 50% Contribution margin per unit 280.92 2$ 96.80 147.02 Fixed expenses 209,000.00 $ 32,697.50 Operating income Fixed expenses $209,000 = $418,000 Break-even point in sales dollars Overall CM ratio 0.50 Break-even point in unit sales: Total Fixed expenses $209,000 = 1,037.66 units Weighted-average CM per unit $201.41* * ($280.92 x 0.50) + ($96.80 x 0.25) + ($147.02 x 0.25)

Answer 1

1.

1	Contribution Margin Income Statement
		Product
		Sinks		Mirrors		Vanities		Total
	Percentage of total Sales	34%		47%		20%		100%
	Sales	196645.00	100%	271040.00	100%	114345.00	100%	582030.00	100%
	Variable Expenses	58993.50	30%	216832.00	80%	62889.75	55%	338715.25	58%
	Contribution Margin	$       1,37,651.50	70%	$    54,208.00	20%	$        51,455.25	45%	$ 2,43,314.75	42%
	Fixed Expenses							$ 209000.00
	Operating income (loss)							$     34,314.75

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2	Break-even point in sales dollars	Fixed Expenses/Overall CM ratio
		$209000/0.42
		$             4,97,619

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3	Break-even point in unit sales	Fixed Expenses/Weighted average CM per unit
		$209000/$170.41
		1,226	(or 1227)
	Weighted average CM per unit	(280.92*0.34)+(96.8*0.47)+(147.02*0.20)
		170.41

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Contribution Margin Income Statement
	Product
	Sinks		Mirrors		Vanities		Total
Percentage of total Sales	34%		47%		20%		100.00%
Sales	196645.00	100%	271040.00	100%	114345.00	100%	582030.00	100%
Variable Expenses	58993.50	30%	216832.00	80%	62889.75	55%	338715.25	58%
Contribution Margin	$       1,37,651.50	70%	$    54,208.00	20%	$        51,455.25	45%	$ 2,43,314.75	42%
Contribution Margin per unit
(Contribution Margin/Sales Units)	$                 280.92		$            96.80		$              147.02
	$137651.5/490		$54208/560		$51455.25/350

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