Alo Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Alo expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows: Regular Model Deluxe Model Total Sales $14,400,000 $12,060,000 $26,460,000 Less: Variable costs 8,640,000 7,236,000 15,876,000 Contribution margin $5,760,000 $4,824,000 $10,584,000 Less: Direct fixed costs 1,200,000 960,000 2,160,000 Segment margin $4,560,000 $3,864,000 $8,424,000 Less: Common fixed costs 1,838,400 Operating income $6,585,600 Required: 1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit. Regular models fill in the blank 1 units Deluxe models fill in the blank 2 units 2. Using information only from the total column of the income statement, compute the sales revenue that must be generated for the company to break even. Round the contribution margin ratio to four decimal places. Use the rounded value in the subsequent computation. (Express as a decimal-based amount rather than a whole percentage.) Round the amount of revenue to the nearest dollar. Contribution margin ratio fill in the blank 3 Revenue

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

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Question

CVP Analysis of Multiple Products

Alo Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Alo expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows:

	Regular Model	Deluxe Model	Total
Sales	$14,400,000	$12,060,000	$26,460,000
Less: Variable costs	8,640,000	7,236,000	15,876,000
Contribution margin	$5,760,000	$4,824,000	$10,584,000
Less: Direct fixed costs	1,200,000	960,000	2,160,000
Segment margin	$4,560,000	$3,864,000	$8,424,000
Less: Common fixed costs			1,838,400
Operating income			$6,585,600

Required:

1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit.

Regular models	fill in the blank 1 units
Deluxe models	fill in the blank 2 units

2. Using information only from the total column of the income statement, compute the sales revenue that must be generated for the company to break even. Round the contribution margin ratio to four decimal places. Use the rounded value in the subsequent computation. (Express as a decimal-based amount rather than a whole percentage.) Round the amount of revenue to the nearest dollar.