Lyndia Company is a merchandiser that sells a total of 15 products to its customers. The company provided the following information from last year:

Product	Unit Sales			Selling Price per Unit			Variable Cost per Unit
1		9,000		$	29		$	12.95
2		16,500		$	99		$	68.55
3		6,000		$	85		$	42.50
4		19,500		$	109		$	85.00
5		4,500		$	19		$	6.35
6		27,000		$	119		$	92.00
7		3,000		$	39		$	14.30
8		7,500		$	79		$	33.18
9		9,000		$	69		$	30.36
10		15,000		$	95		$	77.60
11		10,500		$	59		$	25.40
12		1,500		$	65		$	29.00
13		3,000		$	44		$	12.40
14		6,000		$	49		$	13.48
15		12,000		$	89		$	61.83
		150,000

Last year, Lyndias total fixed expenses and net operating income were $3,000,000 and $1,223,070, respectively. The company would like your assistance in developing some financial projections for this year.

3. Refer to the original data (in other words, return cell Q15 to its original value of 0%) and assume the sales mix percentages (as shown in rows 3 and 21) hold constant.

a. Using Goal Seek, calculate the total unit sales required to break even. (Hint: Instruct Goal Seek to obtain a net operating income of $0, as shown in cell Q31, by changing the unit sales in cell Q14.)

b. What are the dollar sales required to break even?

c. What was the companys margin of safety last year?

4. Refer to the original data (in other words, return cell Q14 to its original value of 150,000 units). Assume the sales mix holds constant and the company plans to increase the selling prices of all products by 5%. (Hint: Focus on cell Q16 to input this projection.)

a. Using Goal Seek, calculate the total unit sales required to break even. Is your answer greater than, less than, or equal to the answer you obtained in requirement 3a?

b. How is the amount in cell B23 calculated?

c. Why does the contribution margin ratio shown in cell R29 differ from the corresponding percentage from last year, as shown in cell R9?

d. Should the company increase its selling prices by 5% this year?

6. Assume the company believes it can increase profits by shifting the sales mix away from products with the highest selling prices and toward the products with the highest contribution margins per unit. To accomplish this goal, the company plans to begin paying sales commissions based on total contribution margin rather than total sales. It also plans to adjust its advertising expenditures to better support the new sales mix strategy. The company hopes these actions will increase the sales mix percentages of the products with the four highest contribution margins per unit by 2% per product. The company also expects a 2% drop in the sales mix percentages of the four products with the highest selling prices. (Hint: Before proceeding, go to row 21 of the spreadsheet and input the 2% increase or decrease for each of the eight affected products, using Conditional Formatting.)

a. If the companys sales mix shifts as just described and it sells a total of 150,000 units, what would be the projected sales for this year? How does this amount compare to the sales from last year?

b. If the companys sales mix shifts as just described and it sells a total of 150,000 units, what net operating income will it earn this year? How does the projected net operating income for this year compare to the sales from last year?

c. Why does the contribution margin ratio shown in cell R29 differ from the contribution margin ratio shown in cell R9?

1 2 3 5 6 7 8 9 10 11 12 13 14 15 Total % Weighted-Average CM per Unit 15,000 10,500 Last Year: Unit sales Sales mix percentages Selling price per unit Variable expense per unit 3,000 2% 6,000 4% 9,000 6% 29.00 $ 12.95 $ 150,000 100% 16,500 11% 99.00 68.55 6,000 4% 85.00 $ 42.50 $ 19,500 13% 109.00 $ 85.00 $ 4,500 3% 19.00 $ 6.35 $ 27,000 18% 119.00 $ 92.00 $ 3,000 2% 39.00 $ 14.30 $ 7,500 5% 79.00 $ 33.18 $ 9,000 6% 69.00 $ 30.36 $ 10% 95.00 1,500 1% 65.00 $ 29.00 $ 12,000 8% 89.00 $ $ 7% 59.00 $ 25.40 $ $ $ $ $ 44.00 12.40 49.00 13.48 $ $ 77.60 $ 61.83 $ $ $ $ $ $ $ $ $ 261,000 116,550 1,633,500 1,131,075 502,425 510,000 $ 255,000 255,000 2.125,500 1,657,500 468,000 85,500 28.575 3.213,000 2,484,000 729,000 117,000 42,900 592,500 248,850 621,000 273,240 1425,000 1.164.000 619,500 $ 266,700 352,800 97,500 43,500 Sales Variable expenses Contribution margin Fixed expenses Net operating income 132,000 37,200 294,000 80,880 1,068,000 741,960 12,795,000 8,571,930 100.0% 67.0% $ 144450 56,925 74,100 343,650 347,760 261,000 54,000 94,800 213,120 326,040 4,223,070 33.0% 28.15 3,000,000 1,223,070 150,000 Projections for This Year: Last year unit sales Change in unit sales Change in selling prices Change in variable expenses Change in fixed expenses 0% 0% 0% 0% 1 2 3 5 6 7 8 9 10 11 12 13 14 15 Total % Weighted Average CM per Unit 100% 150,000 Sales mix percentages Unit sales Selling price per unit Variable expense per unit Contribution margin per unit 6% 9,000 29.00 $ 12.95 $ 16.05 $ $ $ 11% 16,500 99.00 $ 68.55 $ 30.45 $ 4% 6,000 85.00 $ 42.50 $ 42.50 $ 13% 19,500 109.00 $ 85.00 $ 24.00 $ 3% 4,500 19.00 $ 6.35 $ 12.65 $ 18% 27,000 119.00 92.00 27.00 2% 3,000 39.00 $ 14.30 $ 24.70 $ $ 5% 7,500 79.00 33.18 45.82 $ $ $ 6% 9,000 69.00 30.36 38.64 10% 15,000 95.00 $ 77.60 $ 17.40 $ 7% 10,500 59.00 $ 25.40 33.60 $ 1% 1,500 65.00 $ 29.00 $ 36.00 $ 2% 3,000 44.00 12.40 31.60 4% 6,000 49.00 $ 13.48 $ 35.52 $ 8% 12,000 89.00 61.83 27.17 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 261,000 116,550 1,633,500 $ 1,131,075 502,425 $ 510,000 $ 255,000 255,000 2,125,500 1,657,500 468,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income 85,500 28,575 56,925 3,213,000 2484,000 729,000 117,000 42,900 74,100 592,500 248,850 621,000 273,240 347,760 1,425,000 $ 1,164,000 261,000 619,500 $ 266,700 352,800 97,500 43,500 54,000 132,000 $ 37,200 294,000 80,880 213,120 1,068,000 $ 741,960 12,795,000 8,571,930 100.0% 67.0% 33.0% 144450 343,650 $ 94,800 326,040 28.15 4,223,070 3,000,000 1,223,070 Profit Graph Information Profit Data Points 150,000 CVP Graph Information Data Points $ 150,000 $ Sales Fixed Expenses Total Expenses $ 3,000,000 $ 3,000,000 12,795,000 $ 3,000,000 $ 11,571,930 1 2 3 5 6 7 8 9 10 11 12 13 14 15 Total % Weighted-Average CM per Unit 15,000 10,500 Last Year: Unit sales Sales mix percentages Selling price per unit Variable expense per unit 3,000 2% 6,000 4% 9,000 6% 29.00 $ 12.95 $ 150,000 100% 16,500 11% 99.00 68.55 6,000 4% 85.00 $ 42.50 $ 19,500 13% 109.00 $ 85.00 $ 4,500 3% 19.00 $ 6.35 $ 27,000 18% 119.00 $ 92.00 $ 3,000 2% 39.00 $ 14.30 $ 7,500 5% 79.00 $ 33.18 $ 9,000 6% 69.00 $ 30.36 $ 10% 95.00 1,500 1% 65.00 $ 29.00 $ 12,000 8% 89.00 $ $ 7% 59.00 $ 25.40 $ $ $ $ $ 44.00 12.40 49.00 13.48 $ $ 77.60 $ 61.83 $ $ $ $ $ $ $ $ $ 261,000 116,550 1,633,500 1,131,075 502,425 510,000 $ 255,000 255,000 2.125,500 1,657,500 468,000 85,500 28.575 3.213,000 2,484,000 729,000 117,000 42,900 592,500 248,850 621,000 273,240 1425,000 1.164.000 619,500 $ 266,700 352,800 97,500 43,500 Sales Variable expenses Contribution margin Fixed expenses Net operating income 132,000 37,200 294,000 80,880 1,068,000 741,960 12,795,000 8,571,930 100.0% 67.0% $ 144450 56,925 74,100 343,650 347,760 261,000 54,000 94,800 213,120 326,040 4,223,070 33.0% 28.15 3,000,000 1,223,070 150,000 Projections for This Year: Last year unit sales Change in unit sales Change in selling prices Change in variable expenses Change in fixed expenses 0% 0% 0% 0% 1 2 3 5 6 7 8 9 10 11 12 13 14 15 Total % Weighted Average CM per Unit 100% 150,000 Sales mix percentages Unit sales Selling price per unit Variable expense per unit Contribution margin per unit 6% 9,000 29.00 $ 12.95 $ 16.05 $ $ $ 11% 16,500 99.00 $ 68.55 $ 30.45 $ 4% 6,000 85.00 $ 42.50 $ 42.50 $ 13% 19,500 109.00 $ 85.00 $ 24.00 $ 3% 4,500 19.00 $ 6.35 $ 12.65 $ 18% 27,000 119.00 92.00 27.00 2% 3,000 39.00 $ 14.30 $ 24.70 $ $ 5% 7,500 79.00 33.18 45.82 $ $ $ 6% 9,000 69.00 30.36 38.64 10% 15,000 95.00 $ 77.60 $ 17.40 $ 7% 10,500 59.00 $ 25.40 33.60 $ 1% 1,500 65.00 $ 29.00 $ 36.00 $ 2% 3,000 44.00 12.40 31.60 4% 6,000 49.00 $ 13.48 $ 35.52 $ 8% 12,000 89.00 61.83 27.17 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 261,000 116,550 1,633,500 $ 1,131,075 502,425 $ 510,000 $ 255,000 255,000 2,125,500 1,657,500 468,000 Sales Variable expenses Contribution margin Fixed expenses Net operating income 85,500 28,575 56,925 3,213,000 2484,000 729,000 117,000 42,900 74,100 592,500 248,850 621,000 273,240 347,760 1,425,000 $ 1,164,000 261,000 619,500 $ 266,700 352,800 97,500 43,500 54,000 132,000 $ 37,200 294,000 80,880 213,120 1,068,000 $ 741,960 12,795,000 8,571,930 100.0% 67.0% 33.0% 144450 343,650 $ 94,800 326,040 28.15 4,223,070 3,000,000 1,223,070 Profit Graph Information Profit Data Points 150,000 CVP Graph Information Data Points $ 150,000 $ Sales Fixed Expenses Total Expenses $ 3,000,000 $ 3,000,000 12,795,000 $ 3,000,000 $ 11,571,930