Gogan Company manufactures and sells two products: Basic and Deluxe. Monthly sales, CM ratios, and the CM per unit for the two products are shown below:
| |
Basic
|
Deluxe
|
Total
|
|
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
|
$600,000
|
$400,000
|
$1,000,000
|
|
Contribution margin ratio . . . . . . . . . . . . .
|
60%
|
35%
|
?
|
|
Contribution margin per unit . . . . . . . . . .
|
$9.00
|
$11.50
|
?
|
The company's fixed expenses total $400,000 per month.
Required:
1. Prepare a contribution format income statement for the company as a whole.
2. Compute the overall break-even point in dollars for the company based on the current sales mix.
3. Compute the overall break-even point in units for the company based on the current sales mix.
4. If sales increase by $50,000 per month, by how much would you expect operating income to increase? What are your assumptions?
5. If sales increase by 5,000 units per month, by how much would you expect operating income to increase? What are your assumptions?