Andrews Sporting Goods, Inc., produces and sells children’s softball mitts: vinyl mitts and basic leather mitts. Last year, Andrews sold 24,000 vinyl mitts and 12,000 leather mitts. Information on the two products is as follows:

Total fixed cost is $93,500.

Refer to the information for Andrews Sporting Goods given above. Suppose that in the coming year, the company plans to produce an autographed mitt. The company estimates that 6,000 autographed mitts can be sold at a price of $20 and a variable cost per unit of $12. Total fixed cost must be increased by $17,800 (making total fixed cost $111,300). Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Required:

1. What is the sales mix of vinyl mitts, leather mitts, and autographed mitts?

2. Compute the break-even quantity of each product. (Round break-even packages to four significant digits and break-even units to the nearest whole unit.)

3. Prepare an income statement for Andrews Sporting Goods, Inc. for the coming year. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. (Note: Round the contribution margin ratio to four decimal places; round the break-even sales revenue to the nearest dollar.)

4. Compute the margin of safety for the coming year in sales dollars.

Transcribed Image Text:

Price Variable cost per unit Vinyl Mitts $10 6 Leather Mitts $16 10