Assignment 1 - Beginning of class
PROBLEM 2 Chapter 3
The Firestone Company retails two products, a standard and a deluxe version of a luggage carrier. The budgeted income statement is as follows:
Standard Carrier Deluxe Carrier Total
Units sold 150,000 50,000 200,000
Revenues @ $20 and $30 per unit $3,000,000 $1,500,000 $4,500,000
Variable costs@ $14 and $18 per unit $2,100,000 $ 900,000 $3,000,000
Contribution margins@ $6 and $12 per unit $ 900,000 $ 600,000 $1,500,000
Fixed costs $1,200,000
Operating income $ 300,000
REQUIRED:
1. Compute the breakeven point in units, assuming that the planned revenue mix is maintained
2. Compute the breakeven point in units if
a. Only standard carriers are sold
b. Only deluxe carriers are sold
3. Suppose 200,000 units are sold, but only 20,000 are deluxe. Compute the operating income. Compute the breakeven point if these relationships persist in the next period. Compare your answers with the original plans and the answer in requirement 1. What is the major lesson of this problem?