I have included below a description of the technical component of the case (7.3 Multiculture Bevce) and the first step as an example. STEP 1: The income statement does not present info by product, so you need to split out revenue and variable costs for Slava and Zirkova (separately) and then when the CM is found for each, deduct fixed costs to find net income. You also have to remove fixed overhead out of cost of goods sold ((90% is variable) broken down in Slava and Zirkoya) STEP 3: Then calculate the CM per unit and then use the sales mix of 1:2 to calculate the CM of a bundle of 1 unit of Slava and 2 units of Zirkova (add together and this gives one bundle price) STEP 4: then calculate the number of bundles to earn profit of 150,000. This formula will give you the total number of bundles that must be sold STEP 5: then just apply costs (ex 1 bundle *bundle price for Slava and 2 bundles *bundle price for Zirkova) This is a description of finding the number you need. I will give you the first step to get you started, OK STEP 1: Slava Zirkoya Total Sales 400,000 320,000 720,000 Less VC Sold 210,600 70.200 280,800 (312,000*.9) Commissions 35,000 5.000 40.000 245,600 75,200 320,800 Contribution Margin 154,400 244.800 399 200 Less: Fixed Costs Fixed Manu Overhead 31,200 (312,000*.1) Other Fixed Costs 353,000 384,200 Net Income 15,000 7.3 Multiculture Bevco Note: While this case is based on a real company, numbers and some company information have been changed to protect confidential information and to make the case appropriate for teaching purposes. Multiculture Bevco (MBC) is a developer and marketer of high-quality, niche alcoholic beverage products. The Oakville, Ontario-based company developed and owns two vodka trademarks: Slava Ultra Premium Vodka and Zirkova Premium Vodka. The Slava and Zirkova trademarks, designs, and recipes are owned by MBC; however, the beverages are produced in Ukraine. The distillery is located in Zolotonosha, in the Cherkasy region, which was the birthplace of vodka during the Polish-Lithuanian empire. The vodka is currently sold in four provinces. MBC's vodka sales represent over 80% of alcoholic beverage imports from Ukraine to Canada. John and Katherine started MBC in 2005 with the launch of Slava, and Zirkova followed a year later They are professional engineers who worked for a major distributor of consumer products after graduating from university, but they always dreamed of owning their own business. That dream was realized when they moved to Ukraine and founded a consulting firm which led them to discover the distillery in Zolotonosha. They saw the potential for niche vodkas specifically designed for how Canadians enjoy vodka but produced in a country that knows vodka. They both work full-time for MBC and currently have three employees. While MBC is profitable, as entrepreneurs their family income depends on MBC's income. Slava is a martini or sipping vodka and is four times distilled and 12 times filtered, which puts it in the category of ultra premium. Zirkova is designed to make mixed drinks taste better; it is also four times dis- tilled and is produced in the traditional method, without any additives. Both products have won gold medals at the San Francisco World Spirits Competition. Required Required John and Katherine are planning for next year and are considering two things. First, they would like to know how many units of Slava and Zirkova they need to sell next year to reach a target net income of $150,000 (ignore income taxes and duties). They are not sure how to calculate this because most of their fixed costs relate to both products. Second, they wonder how they could improve their costing system to help them make better decisions about their products and their company. MBC's most recent income statement is provided in Exhibit 1. John and Katherine also estimate that 75% of variable manufacturing costs relate to Slava and they expect their current sales mix to stay the same next year. Prepare a report for John and Katherine that addresses their questions. I have included below a description of the technical component of the case (7.3 Multiculture Bevce) and the first step as an example. STEP 1: The income statement does not present info by product, so you need to split out revenue and variable costs for Slava and Zirkova (separately) and then when the CM is found for each, deduct fixed costs to find net income. You also have to remove fixed overhead out of cost of goods sold ((90% is variable) broken down in Slava and Zirkoya) STEP 3: Then calculate the CM per unit and then use the sales mix of 1:2 to calculate the CM of a bundle of 1 unit of Slava and 2 units of Zirkova (add together and this gives one bundle price) STEP 4: then calculate the number of bundles to earn profit of 150,000. This formula will give you the total number of bundles that must be sold STEP 5: then just apply costs (ex 1 bundle *bundle price for Slava and 2 bundles *bundle price for Zirkova) This is a description of finding the number you need. I will give you the first step to get you started, OK STEP 1: Slava Zirkoya Total Sales 400,000 320,000 720,000 Less VC Sold 210,600 70.200 280,800 (312,000*.9) Commissions 35,000 5.000 40.000 245,600 75,200 320,800 Contribution Margin 154,400 244.800 399 200 Less: Fixed Costs Fixed Manu Overhead 31,200 (312,000*.1) Other Fixed Costs 353,000 384,200 Net Income 15,000 7.3 Multiculture Bevco Note: While this case is based on a real company, numbers and some company information have been changed to protect confidential information and to make the case appropriate for teaching purposes. Multiculture Bevco (MBC) is a developer and marketer of high-quality, niche alcoholic beverage products. The Oakville, Ontario-based company developed and owns two vodka trademarks: Slava Ultra Premium Vodka and Zirkova Premium Vodka. The Slava and Zirkova trademarks, designs, and recipes are owned by MBC; however, the beverages are produced in Ukraine. The distillery is located in Zolotonosha, in the Cherkasy region, which was the birthplace of vodka during the Polish-Lithuanian empire. The vodka is currently sold in four provinces. MBC's vodka sales represent over 80% of alcoholic beverage imports from Ukraine to Canada. John and Katherine started MBC in 2005 with the launch of Slava, and Zirkova followed a year later They are professional engineers who worked for a major distributor of consumer products after graduating from university, but they always dreamed of owning their own business. That dream was realized when they moved to Ukraine and founded a consulting firm which led them to discover the distillery in Zolotonosha. They saw the potential for niche vodkas specifically designed for how Canadians enjoy vodka but produced in a country that knows vodka. They both work full-time for MBC and currently have three employees. While MBC is profitable, as entrepreneurs their family income depends on MBC's income. Slava is a martini or sipping vodka and is four times distilled and 12 times filtered, which puts it in the category of ultra premium. Zirkova is designed to make mixed drinks taste better; it is also four times dis- tilled and is produced in the traditional method, without any additives. Both products have won gold medals at the San Francisco World Spirits Competition. Required Required John and Katherine are planning for next year and are considering two things. First, they would like to know how many units of Slava and Zirkova they need to sell next year to reach a target net income of $150,000 (ignore income taxes and duties). They are not sure how to calculate this because most of their fixed costs relate to both products. Second, they wonder how they could improve their costing system to help them make better decisions about their products and their company. MBC's most recent income statement is provided in Exhibit 1. John and Katherine also estimate that 75% of variable manufacturing costs relate to Slava and they expect their current sales mix to stay the same next year. Prepare a report for John and Katherine that addresses their questions