Question
Lumpy Soup Limited presently produces road signs and computers for the Brazil and South African markets but is looking to expand to cover a greater
Lumpy Soup Limited presently produces road signs and computers for the Brazil and South African markets but is looking to expand to cover a greater international range.
The key planned financial information related to the companys key products for 2024 are as follows:
Activity | Road Signs | Computers |
Selling Price | $180.00 | $150.00 |
Direct Material (per unit) | $21.00 | $11.00 |
Direct Labour (per unit) | $19.00 | $75.00 |
Variable Manufacturing Overhead (per unit) | $11.00 | $21.00 |
Variable Selling Expense (per unit) | $26.00 | $9.00 |
Fixed Manufacturing Overhead (total) | $2,140,000 | $400,000 |
Fixed Administrative Overhead (total) | $560,000 | $600,000 |
Fixed Marketing Overhead(total) | $900,000 | $1,850,000 |
The company has a sales mix ratio of 30% to 70%. The company has estimated that in 2024 they will produce and sell 140,000 total units.
Required:
1) Calculate the contribution margin per unit and the contribution ratio for Lumpy Soup Limited based on production and sales estimates for 2024 and based on the sales mix of 30% to 70%.
2) Calculate the total number of units that are required to be sold in 2024 in order for Lumpy Soup Limited to breakeven given the 30% to 70% mix ratio.
3) Calculate the total sales revenue Lumpy Soup Limited would achieve at the breakeven quantity given the 30% to 70% sales mix ratio and projected production and sales estimates for 2024.
4) Assume in 2024 the minimum net income Lumpy Soup Limited wishes to achieve is $9,000,000. Given the sales mix ratio of 30% to 70%, what is the revenue Lumpy Soup Limited would generate to ensure achieve the desired minimum net income and the number of road signs and computers to be sold?
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