Question

CVP Analysis of Multiple Products 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 100,000 regular models and 20,000 deluxe models. A segmented income statement for the two products is as follows: Total Regular Model $16,000,000 9,600,000 Deluxe Model $13,400,000 Sales $29,400,000 Less: Variable costs &040.000 17,640,000 Contribution margin $6,400,000 $5,360,000 $11,760,000 Less: Direct fixed costs 1,200,000 960,000 2,160,000 Segment margin $5,200,000 $4,400,000 $9,600,000 Less: Common fixed costs 1,603,200 Operating income $7,996,800 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 Deluxe models units 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 Feedback Check My Work 1. See Cornerstone 16.5. You can't do a simple average of contribution margin per unit. Calculate the package contribution margin for regular and deluxe models. 2. See Cornerstone 16.5. Contribution margin ratio is the key.

Answer 1

Breakeven point in units is = Fixed cost/Weighted contribution margin per unit Contribution margin per unit = (Contribution margin/Sales units) Weighted contribution margin ratio :- Model Sales Units Sales Mix % Contribution Margin Per unit 64.00 268.00 Weighted Contribution Margin% 21.33 178.67 200.00 Regular Model Deluxe Model 100,000 200,000 300,000 33.33% 66.67% 100.00% Break-even point in units is = (1603200/200) Break-even point in units is = 8,016 Breakeven point of each model : Breakeven Model Sales Mix % Regular Model Deluxe Model units 8,016 33.33% 8,016 66.67% Break-even units total Breakeven Sales Unit 2,672 5,344 8,016 Contribution margin ratio :- Model Contribution Margin Sales Mix% Regular Model Deluxe Model Weighetd contribution margin 13.33% 26.67% 40.00% 40.00% 33.33% 40.00% 66.67% Contribution margin Ratio Breakeven sales revenue is = Fixed cost/weighted contribution margin ratio Breakeven sales revenue is = (1603200/40%) Breakeven sales revenue is = 5 4,008,000/. Alternatively Sales revenue at break-even units :: Breakeven Model Sales Unit Regular Model 2,672 Deluxe Model 8,016 Selling Price per unit 160.00 670.00 Sales Revenue 427,520 3,580,480 5,344 4,008,000