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More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next year. The projected income statement is as follows: Required: 1. Set up the given income statement on a spreadsheet (e.g., Excel TM ). Then, substitute the following sales mixes, and calculate operating income. Be sure to print the results for each sales mix (a through d). 2. Calculate the break-even units for each product for each of the preceding sales mixes.

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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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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 16, Problem 32P
Textbook Problem
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More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next year. The projected income statement is as follows:

Chapter 16, Problem 32P, More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next , example  1

Required:

  1. 1. Set up the given income statement on a spreadsheet (e.g., ExcelTM). Then, substitute the following sales mixes, and calculate operating income. Be sure to print the results for each sales mix (a through d).

Chapter 16, Problem 32P, More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next , example  2

  1. 2. Calculate the break-even units for each product for each of the preceding sales mixes.

1.

To determine

Show the income statement on the spreadsheet, for the given sales mixes and compute the operating income.

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 operating income for the given sales mixes:

ParticularsRegularSanderMini-SanderAmount ($)
Sales Mix of 2:1   
Sales$3,000,000$2,250,000$5,250,000
Less: Variable expenses $1,800,000$1,125,000$2,925,000
Contribution margin$1,200,000$1,125,000$2,325,000
Less: Direct Fixed Expenses $250,000$450,000$700,000
Product Margin$950,000$675,000$1,625,000
Less: Common fixed expenses  $600,000
Operating income  $1,025,000
Sales Mix of 1:1   
Sales$2,400,000$3,600,000$6,000,000
Less: Variable expenses $1,440,000$1,800,000$3,240,000
Contribution margin$960,000$1,800,000$2,760,000
Less: Direct Fixed Expenses $250,000$450,000$700,000
Product Margin$710,000$1,350,000$2,060,000
Less: Common fixed expenses  $600,000
Operating income  $1,460,000
Sales Mix of 1:3   
Sales$1,200,000$5,400,000$6,600,000
Less: Variable expenses $720,000$2,700,000$3,420,000
Contribution margin$480,000$2,700,000$3,180,000
Less: Direct Fixed Expenses $250,000$450,000$700,000
Product Margin$230,000$2,250,000$2,480,000
Less: Common fixed expenses  $600,000
Operating income  $1,880,000
Sales Mix of 1:2   
Sales$1,200,000$3,600,000$4,800,000
Less: Variable expenses $720,000$1,800,000$2,520,000
Contribution margin$480,000$1,800,000$2,280,000
Less: Direct Fixed Expenses $250,000$450,000$700,000
Product Margin$230,000$1,350,000$1,580,000
Less: Common fixed expenses  $600,000
Operating income  $980,000

Table (1)

Working notes:

Compute the sales mix ratio for given sales mixes...

2.

To determine

Compute for each sales mix the break-even point.

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Chapter 16 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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