Multiple-Product Profitability Analysis (LO3, 4)

Hearth Manufacturing Company produces two models of wood-burning stoves, Cozy Kitchen and All-

House. Presented is sales information for the year 2012.

Cozy Kitchen | All-House Total Units manufactured and sold.......... 1,000 1,500 2,500 DAICGIOVEMUCM renWe viek ceaw e e cas $300,000 $750,000 $1,050,000 Natta DIOTCOSIS Sek cid acai mein sie ee vaca (200,000) (450,000) (650,000)

Conmibsutlomimarainees cs ses. vee. « e $100,000 $300,000 400,000 TREXCC C OS IGeRe Icient sacs = asia aor? ee (240,000)

Botore-taxpnonitemmemciea. ductieals toeu-s 160,000 Income taxes (40 percent) ............ (64,000)

PNG REIFAREDS [2O]L LLS ny CRA One oe ne $ 96,000 Required

a. Determine the current break-even point in sales dollars.

b. With the current product mix and break-even point, determine the average unit contribution margin and unit sales.

c. Sales representatives believe that the total sales will increase to 3,000 units, with the sales mix likely shifting to 80 percent Cozy Kitchen and 20 percent All-House over the next few years.

Evaluate the desirability of this projection.