Problem
Pinegrove Golf Supplies is an online store that sells two types of golf balls: practice balls and tournament balls. The golf balls are sold in plastic sleeves containing three golf balls. Practice balls sell for $5.00 per sleeve; tournament balls sell for $12.00 per sleeve. Owner Evan Hall purchases the golf balls directly from the manufacturer and pays $3.00 per sleeve for the practice balls and $6.00 per sleeve for the tournament balls. Fixed costs total $200,000 include Evan's and his staff's salaries, website hosting, and accounting and legal fees. When preparing the sales forecast for the year, Evan expects his sales mix to be 50-percent practice balls and 50-percent tournament balls.
Task
1. Calculate the annual breakeven point for Pinegrove Golf Supplies-both in terms of sales revenues and units for each type of ball based on the assumption that an equal number of each type of balls will be sold (You need to use just a little simple algebra here.)
2. Evan has gathered the sales data for the past year (in a separate Excel file). Calculate the sales, variable expenses, and contribution margin totals for each type of ball.
3. Calculate the actual sales mix for the year. Round the percentage to one decimal place.
4. Prepare Pinegrove's contribution format income statement for the year using the actual sales data. Assume all prices and costs were as projected.
5. Using the actual sales mix, calculate the breakeven point for the year. How does this compare to the projected breakeven point Evan used in preparing his sales forecast? Why does it differ?
6. Evan was a bit unpleasantly surprised by the year's profits. He has expecting to generate nearly twice as much net operating income with the sale of over 55,000 sleeve of balls. Explain why the actual net operating income failed to meet Evan's expectations.