6-3. Multiple Product C-V.P Analysis (CMA, adapted) Hewtex Electronics manufactures two prodacts, tape r culators. and sells them recorders and y to wholesalers and retailers. T with the company's performance for the currens fiscal year sales through December 31, 1982 indieate that 70.000 tape recorders and 140,000-e ment, whieh appears percent on sales after taxes asors will be sold this year. The projected carnings state below, shows that Hewies will exceed its earnings goal of 9 ape reconder business has been fairly stable for the last few years, and o change the tape recorder price. However. the among manufacturers of electronic calculasors has been increasing. s calculators have been very popular with consumers. In order to sustain sinterest in their calculators and to meet the price reductions expected from , management has decided to reduce the wholesale price of its ealculator The t the company does not intend t competition from $22.50 company plans to to $20.00 per unit effective January 1. 1983. At the same time the spend an addisional 537,000 on advertising during fiscal year 1983, actions, management estimates that 80 percent of its total a consequence of these revenue will be derived in prior years, the from calculator sales as compared to 75 percent in 1982. As sales mix is assumed to be the same at all volume levels total fixed overhead costs will not change in 1983, nor will the variable overhead cost rates (applied on a direct labor hour base). However, the cost ef materials and direct labor is expected to change. The cost of solid state electronic The compone ents will be cheaper in 1983. Hewtex estimates that material costs will drop 10 percent for the tape recorders and 20 percent for the caleulators in 1983. However direct labor costs for both products will increase 10 percent in the coming year Required: .How many tape recorder and electronic ealculator units did Hewtex Elec- 2. What volume of sales is required if Hewtex Electronics is to earn a profit 3. Derive the equation describing the level of profits in 1983 as a function tronics have to sell in 1982 to break even? in 1983 equal to 9 percent on sales after taxes? of the number of tape recorders and electronic calculators sold. Plot the breakeven line and the line representing a profit of 9 percent of sales after taxes. HEWTEX ELECTRONICS Projected Earnings Statement Tape Recorders Electronic Calculators Tota! (000 For the Year Ended December 31, 1982 Tota! Toral Amount (000 Amount omitted) Per Unit omitted Per Unit (000 omitted) S1.0S0 S15.00 .150 2.50 .200.0 Saies Production costs: Materials Direct labor Variable overhead Fixed overhead s280 4.00 S 630 S 4.50 S 910.0 420 280 140 140 70 2.00 2.00 3.00 2.00 560.0 420.0 S 630 9.00 S1.540 S11.00 $2.170.0 T20 56.00 51.610 STT50 52.030.0 costs Gross margin Fixed selling and administrative Net income before income taxes income taxes (55%) Net income 990.0 544.5
