Derby Phones is considering the introduction of new model of headphones with the following prices and cost characteristics
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Sales price
|
$270 per unit
|
|
Variable cost
|
120 per unit
|
|
Fixed cost
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300,000 per month
|
Require
a) What number must Derby sell per month to break even
b) What number must Derby sell to make an operating profit of $180,000 for the month.
Exhibit 3.5
|
Lo-Lev Company(1,000, 000 units
|
|
Hi-Lev Company(1,000,000 units)
|
|
|
Amount
|
Percentage
|
Amount
|
Percentage
|
|
Sales
|
$1,000,000
|
100
|
1,000,000
|
100
|
|
Variable cost
|
750,000
|
75
|
250,000
|
25
|
|
Contribution Margin
|
250
|
25
|
750,000
|
75
|
|
Fixed Cost
|
50,000
|
5
|
550,000
|
55
|
|
Operating profit
|
200,000
|
20
|
200,000
|
20
|
|
Break-even Point
|
200,000units
|
|
733,334 units
|
|
|
Contribution margin per init
|
0.25
|
|
0.75
|
|
3.33
The Greenback Stores cost structure is dominated by variable cost with a contribution margin ratio of 2.5 and fixed cost of $40,000. Every dollar of sales contributes 25cents toward fixed costs and profit. The cost structure of competitor. One-Mart, s dominated by fixed cost with a higher contribution margin ratio of .75 and fixe cost of $440,000. Every dollar of sales contributes 75 cents toward fixed costs and profits. Both companies have sales of $800,000 for the month.
Required
a. Compare the two compares cost structures using the format in Exhibit 3.5
b. Supposes that both companies experience a 15 percent increase in sales volume. By how much would each company profits increase?
3.51
Odd Wallow Drinks is considering adding a new line of fruit juice to its merchandise products. This lines of juices has the following prices and cost
|
Selling price per case
|
$75
|
|
Variable cost per case
|
$36
|
|
Fixed cost per year associated with this product
|
$12,168,000
|
|
Income tax rate
|
40%
|
Required
a. Compute Odd Wallow Drink break-even point in units per year
b. How many cases must Odd Wallow Drinks sell to earn $1,872,000 per year after taxes on the juice
3.57
Sundial, Inc. produces two models of sunglass: AU and AZ. The sunglass have the following charaterrstcs
|
AU
|
NZ
|
|
Selling price per unit
|
$160
|
$160
|
|
Variable cost per unit
|
60
|
80
|
|
Expected units sold per yeesra
|
60,000
|
40,000
|
The total fixed cost per years for the company are $2,208,000
Required
a) What is the anticipated level of profits for the expected sales volume
b) Assuming that the product mix is the same at the break-even point, compute the break-even point
c) If the products sales mix were to change to nine Programmer-style and for each Executives style bag, what will be the new break-even volume for On-the-Go
3-59
Minot Furniture sells two model of desk to retail customers-basics and adjustable(for these who want the option to stand at their desk) Basic desk sell for $600 each and adjustable desk sell for $900 each. The variable cost of a basics desk is $360 and that of an adjustable desk is $450. Annual fixed cost at Minot Furniture are $243,000. The break-even point at the current sales mix is 750 total units
Required
How many basic desk and how many adjustable desk are sold at the break-even? In other words, what is the assumed sales mix?