Case # $5$

Home Appliance manufactures two types of ranges, electric and gas. The electric range sells for $$1,500$ each, the gas range sells for $$1,875.$ Direct material cost of $$500,$$$250$ direct labour and $$150$ other manufacturing variable cost are incurred to produce an electric range. Direct material cost of $$650,$$$325$ direct labour and $$174$ other manufacturing variable cost are incurred to produce a gas range. In the past for every gas range that is sold there would be $2$ electric ranges sold. For $2023$ Home Appliance planned to sell $400$ electric ranges and $200$ gas ranges. Actual sales were $425$ electric ranges and $175$ gas ranges. Total Fixed cost is $$260,000$ per year.

Required:

$($A$)$ Compute budgeted income. Compute actual income. Explain why income was different?

$($B$)$ Compute the number of electric ranges and gas ranges that need to be sold to breakeven.

$($C$)$ Check your answer to part $2$ by preparing a contribution margin income statement for Home Appliance for $2023.$

$($D$)$ How can a manager use sensitivity analysis to understand the impact of uncertainty on breakeven analysis?