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Steinberg 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, Steinberg expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows: Required: 1. Compute the number of regular models and deluxe models that must be sold to break even. 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 significant digits and the sales revenue to the nearest dollar.)

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 16, Problem 22E
Textbook Problem
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Steinberg 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, Steinberg expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows:

Chapter 16, Problem 22E, Steinberg Company produces commercial printers. One is the regular model, a basic model that is

Required:

  1. 1. Compute the number of regular models and deluxe models that must be sold to break even.
  2. 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 significant digits and the sales revenue to the nearest dollar.)

1.

To determine

Identify the number of units to be sold for break-even.

Explanation of Solution

Sales mix: Sales mix refers to relative distribution of the total sales amongst the total number of units sold by a company. It is also expressed as a percentage of units sold for each product produced with respect to the total units sold for all the products produced.

Compute the package contribution margin:

InputPrice (A)Unit Variable cost (B)Contribution margin (C = AB)Sales Mix (D)

Package Contribution margin

(E = C × D)

Regular Model$150 $100 $50 5$250
Deluxe Model$675 $405 $270 1$270
Package Total    $520

Table (1)

Compute the break-even packages:

Break-even packages =Total fixed costPackage Contribution margin=$3,440,000$520=6,615.3846 packages

The number of break-even packages is 6,615.3846.

Compute the break-even regular model:

Break-even regular model =Sales mix ×Break-even packages=5 × 6,615

2.

To determine

Calculate the sales revenue required to generate break-even.

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Chapter 16 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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