Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

eBook Print Item Multiple Products, Break-Even Analysis, Operating Leverage Carlyle Lighting Products produces two different types of lamps: a floor lamp and a desk lamp.

eBook

Print Item

Multiple Products, Break-Even Analysis, Operating Leverage

Carlyle Lighting Products produces two different types of lamps: a floor lamp and a desk lamp. Floor lamps sell for $30, and desk lamps sell for $20. The projected income statement for the coming year follows:

Sales $600,000
Total variable cost 400,000
Contribution margin $200,000
Total fixed cost 150,000
Operating income $50,000

The owner of Carlyle estimates that 60% of the sales revenues will be produced by floor lamps and the remaining 40% by desk lamps. Floor lamps are also responsible for 60% of the variable cost. Of the fixed cost, one-third is common to both products, and one-half is directly traceable to the floor lamp product line.

Required:

1. Compute the sales revenue that must be earned for Carlyle to break even. Round the contribution margin ratio to six decimals and sales revenue to the nearest dollar. $fill in the blank 1

2. Compute the number of floor lamps and desk lamps that must be sold for Carlyle to break even. Round variable rates and contribution margins to four decimal places in your calculations. Round the final answers to the nearest whole dollar.

Floor lamps fill in the blank 2 units
Desk lamps fill in the blank 3 units

3. Compute the degree of operating leverage for Carlyle. fill in the blank 4

Now assume that the actual revenues will be 40% higher than the projected revenues. By what percentage will profits increase with this change in sales volume? fill in the blank 5 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Fundamentals In A South African Context

Authors: Gerrit Penning, Rika Butler, Pieter Von Wielligh, Frans Prinsloo

2nd Edition

0190749040, 978-0190749040

More Books

Students also viewed these Accounting questions