Problem- Algorithmic
Multiproduct firm
The Glass Menagerie makes small, pressed-resin ducks and ducklings. They are sold as sets containing one duck and five ducklings. The following information is available about the company's selling prices and cost:
|
Ducks
|
Ducklings
|
|
Selling price
|
$23
|
$13
|
|
Variable cost
|
11
|
9
|
|
Annual fixed cost
|
$299,520
|
Use the contribution margin ratio to calculate break even point sales.
a. What is the average contribution margin ratio? Round your answer to one decimal place __________%
b. Calculate the monthly break-even point if fixed cost is incurred evenly throughout the year. __________ sets per month
At the BEP, indicate how many units of each product will be sold monthly
Ducks __________ per month
Ducklings __________ per month
c. If the company wants to earn $93,440 pre-tax profit monthly, how many units of each product must it sell?
Ducks __________ per month
Ducklings __________ per month
d. Company management has specified $28,512 as monthly net income, and the company is in a 40 percent tax bracket. However, marketing information has indicated that the sales mix has changed to one duck to nine ducklings. How much total revenue and what number of products must be sold to achieve the company's profit objective?
Total Revenue $__________
Ducks __________ units
Ducklings __________ units
e. Refer to the original information. If the company can reduce variable cost per duckling to $4 by raising monthly fixed cost by $8,840, how will the break-even point change? When required, round your answer to the nearest whole number.