Computers And Technology High School

. Cloudy Corporation has provided the following cost data for last year when 50,000 units were produced and sold: All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expense. If the selling price is $12 per unit, the net operating income from producing and selling 120,000 units would be: 17. Constance Company sells two products, as follows: Fixed expenses total $450,000 annually. The expected sales mix in units is 60% for Product Y and 40% for Product Z. How much is Constance Company's expected break-even sales in dollars?

Answers

Answer 1

Constance Company's expected break-even sales in dollars are $2,160,000.

1. Net operating income from producing and selling 120,000 units would be:Given data: Selling price per unit = $12Variable costs = $8 per unitFixed manufacturing overhead = $100,000Fixed selling and administrative expense = $100,000Total cost per unit = Variable cost per unit + Fixed manufacturing overhead / Units produced= $8 + $100,000 / 50,000= $10 per unitContribution margin per unit = Selling price per unit - Total cost per unit= $12 - $10= $2 per unitContribution margin ratio = Contribution margin per unit / Selling price per unit= $2 / $12= 0.167 or 16.7%Net operating income (NOI) for 50,000 units sold= Selling price per unit × Units sold - Total cost= $12 × 50,000 - ($8 × 50,000 + $100,000 + $100,000)= $600,000 - $600,000= $0 NOI for 120,000 units sold= Selling price per unit × Units sold - Total cost= $12 × 120,000 - ($8 × 120,000 + $100,000 + $100,000)= $1,440,000 - $1,460,000= ($20,000) or a net loss of $20,000.2. Constance Company's expected break-even sales in dollars can be calculated as follows:Constance Company sells two products, Y and Z.Fixed expenses = $450,000 per yearSelling price of Product Y = $120 per unitVariable cost of Product Y = $90 per unitSelling price of Product Z = $180 per unitVariable cost of Product Z = $150 per unitContribution margin of Product Y = Selling price of Product Y - Variable cost of Product Y= $120 - $90= $30Contribution margin of Product Z = Selling price of Product Z - Variable cost of Product Z= $180 - $150= $30Weighted average contribution margin per unit = (Contribution margin of Product Y × Sales mix of Product Y) + (Contribution margin of Product Z × Sales mix of Product Z) = ($30 × 60%) + ($30 × 40%)= $18 + $12= $30Contribution margin ratio = Weighted average contribution margin per unit / Selling price per unit= $30 / [(60% × $120) + (40% × $180)]= $30 / ($72 + $72)= $30 / $144= 0.2083 or 20.83%Breakeven sales in units = Fixed expenses / Contribution margin per unit= $450,000 / $30= 15,000Breakeven sales in dollars = Breakeven sales in units × Selling price per unit= 15,000 × [(60% × $120) + (40% × $180)]= 15,000 × ($72 + $72)= 15,000 × $144= $2,160,000.

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