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CD6 EXCEL Tutorial CURRENT DESIGNS Current Designs manufactures two different types of kayak, rotomolded kayaks and composite kayaks. The following information is available for each
CD6 EXCEL Tutorial | ||||||||||
CURRENT DESIGNS | ||||||||||
Current Designs manufactures two different types of kayak, rotomolded kayaks and composite kayaks. | ||||||||||
The following information is available for each product line. | ||||||||||
Rotomolded | Composite | |||||||||
Sales price/unit | $950 | $2,000 | ||||||||
Variable costs/unit | $610 | $1,400 | ||||||||
The company's fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks | ||||||||||
make up 80% of the total units sold. | ||||||||||
Instructions | ||||||||||
(a) | Determine the weighted-average unit contribution margin for Current Designs. | |||||||||
(b) | Determine the break-even points in units for Current Designs and identify how many units of each | |||||||||
type of kayak will be sold at the break-even point. (Round to the nearest whole number.) | ||||||||||
(c ) | Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold. | |||||||||
Calculate the total number of units that would need to be sold to earn a net income of $2,000,000 | ||||||||||
and identify how many units of each type of kayak will be sold at this level of income. (Round to the | ||||||||||
nearest whole number.) | ||||||||||
(d) | Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in | |||||||||
rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed | ||||||||||
costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP | ||||||||||
income statement for each product line. | ||||||||||
(e ) | Using the information in part (d), calculate the degree of operating leverage for each product line and | |||||||||
interpret your findings. (Round to two decimal places.) | ||||||||||
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