Managerial Accounting

Cost-Volume-Profit Relationships

PROBLEM 3-22 Sales Mix; Multiproduct Break-Even Analysis [LO 3-9] Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products-sinks, mirrors, and vanities. Budgeted sales by product and in total for the

coming month are shown below:

Product

~[] Sinks Mirrors Vanities Total

- -· Percentage of total sales ....... . .. . 48% 20% 32%

Sales .................. ... .. .. . $240,000 100% $100,000 100% $160,000

Variable expenses ... .. . .. ....... . 72,000 30% 80,000 80% 88,000 -

Contribution margin ...... .. ...... . $168,000 70% $ 20,000 20% $ 72,000 - --

Fixed expenses ......... ........ .

Net operating income .... ... . . .. . .

_ Fixed expenses _ $223,600 _ Dollar sales to break-even - ~- • . -

0 ~~ - $430,000

ratiO .

As shown by these data, net operating income is budgeted at $36,400 for the month, and break-even sales at $430,000.

Assume that actual sales for the month total $500,000 as planned. Actual sales by product are: sinks, $160,000; mirrors , $200,000; and vanities, $140,000.

Required:

I. Prepare a contribution format income statement for the month based on actual sales data. Present the income statement in the format shown above.

2. Compute the break-even point in sales dollars for the month, based on your actual data. 3. Considering the fact that the company met its $500,000 sales budget for the month , the presi-

dent is shocked at the results shown on your income statement in (1) above. Prepare a brief memo for the president explaining why both the operating results and the break-even point in

sales dollars are different from what was budgeted.

PROBLEM 3-23 Sales Mix; Break-Even Analysis; Margin of Safety [LO 3-7, LO 3-9] Vu\eva Milenario SA, a company located in Toledo, Spain, manufactures and sells two models of

:;,\)tm\shed cutlery- Alvaro and Bazan. Present revenue, cost, and unit sales data for the ·~]lt\lhuct5 appear below. All currency amounts are stated in terms of euros, which are indicated

lhe symbol €.

Alvaro Bazan

Selling price per unit .... . ....... . €4.00 €6.00 Variable expenses per unit ....... . €2.40 €1.20 Number of units sold monthly ..... . 200 units 80 units

expenses are €660 per month .

Reqwred:

Assuming the sales mix above, do the following: a. Prepare a contribution format income statement showing both euro and percent columns

for each product and for the company as a whole. b. Compute the break-even point in euros for the company as a whole and the margin of

safety in both euros and percent of sales. The company has developed another product, Cano, that the company plans to sell for €8 each. At thi s price, the company expects to sell 40 units per month of the product. The variable expense would be €6 per unit. The company's fixed expenses would not change.

-·- 100%

100% $500,000

55% 240,000 -

45% 260,000 --

223,600

$ 36,400

[]

\ ~

107

100% 48%

- 52%