Problem

Multiproduct CVP, Analyzing Break-Even Point, Target Profit, Degree of Operating LeverageM...

Multiproduct CVP, Analyzing Break-Even Point, Target Profit, Degree of Operating Leverage

MowFun Company produces two models of electric lawnmower. Information about MowFun’s products is given below:

 

Product A

Product B

Sales revenue

$264,400

$396,600

— Variable costs

171,400

213,000

Contribution margin

$ 93,000

$183,600

Total units sold

300

500

MowFun’s fixed costs total $82,980.

Required:

1.Determine MowFun’s weighted average contribution margin and weighted average contribution margin ratio.


2.Calculate MowFun’s break-even units and break-even sales dollars.


3.Calculate the number of units of each product that will be sold at break even.


4.Calculate the total sales necessary for MowFun to earn a profit of $172,305.


5.Calculate the sales revenue generated from each product line if MowFun earns its target of $172,305 profit.


6.Calculate MowFun’s degree of operating leverage.

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