Question:
CVP ANALYSIS WITH MULTIPLE PRODUCTS
Reingold Company produces wireless phones. One model is the miniphone-a basic model that is very small and slim. The miniphone fits into a shirt pocket. Another model, the netphone, has a larger display and is Internet-ready. For the coming year, Reingold expects to sell 200,000 miniphones and 600,000 netphones. A segmented income statement for the two products is as follows:
|
|
Miniphone
|
Netphone
|
Total
|
|
Sales
|
$5,000,000
|
$36,000,000
|
$41,000,000
|
|
Less: Variable costs
|
2,400,000
|
30,000,000
|
32,400,000
|
|
Contribution margin
|
$2,600,000
|
$ 6,000,000
|
$ 8,600,000
|
|
Less: Direct fixed costs
|
1,200,000
|
960,000
|
2,160,000
|
|
Segment margin
|
$1,400,000
|
$ 5,040,000
|
$ 6,440,000
|
|
Less: Common fixed costs
|
|
|
1,280,000
|
|
Operating income
|
|
|
$ 5,160,000
|
Required:
1. Compute the number of miniphones and netphones that must be sold to breakeven.
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.