Sonora Company produces and sells pottery chimineas (small clay outdoor fireplaces). The chimineas come in three models:
Question:
Sonora Company produces and sells pottery chimineas (small clay outdoor fireplaces). The chimineas come in three models: small basic, large basic, and carved (ornately shaped and carved). In the coming year, Sonora sold 30,000 small basic models, 50,000 large basic models, and 10,000 carved models. Information on the three models is as follows:
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Total fixed costs are $446,500.
Required:
1. What is the sales mix of small basic to large basic to carved models?
2. Compute the break-even quantity of each product.
3. Prepare an income statement for Sonora for the coming year. What is the overall contribution margin ratio? The overall break-even sales revenue?
4. Compute the margin of safety for the comingyear.
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
1 Sales mix is 351 three times as many small basics will be sold as carved models and five times as ...View the full answer
Cornerstones of Managerial Accounting
ISBN: 978-0324660135
3rd Edition
Authors: Mowen, Hansen, Heitger
