Contribution Margin Ratio, Break-Even Sales Revenue, and Margin of Safety for Multiple-Product Firm

Instructions

Amount Descriptions

Sales Mix and Breakeven

Contribution Margin Income Statement

Margin of Safety

X

Instructions

Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 20,000 portable grills, 55,000 stationary grills, and 5,000 smokers. Information on the three models is as follows:

	Portable	Stationary	Smokers
Price	$92	$198	$247
Variable cost
per unit	47	128	136

Total fixed cost is $2,281,150.

	Required:
1.	What is the sales mix of portable grills to stationary grills to smokers?
2.	Compute the break-even quantity of each product.
3.	Prepare an income statement for Texas-Q for the coming year. What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break-even sales revenue. Enter the contribution margin ratio as a percentage rounded to two decimal places; round the break-even sales revenue to the nearest dollar.
4.	Compute the margin of safety for the coming year.