Multiple-Product Break-Even and Target Profit

Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 30,000 ceiling fans and 70,000 table fans in the coming year. Product price and cost information includes:

	Ceiling Fan				Table Fan
Price		$62				$12
Unit variable cost		$11				$9
Direct fixed cost		$21,600				$46,000

Common fixed selling and administrative expenses total $70,000.

Required:

1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)? Sales mix of ceiling fans to table fans = fill in the blank 6b5a2306c06bfea_1 : fill in the blank 6b5a2306c06bfea_2

2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number.

Break-even ceiling fans	fill in the blank 6b5a2306c06bfea_3
Break-even table fans	fill in the blank 6b5a2306c06bfea_4

Feedback

1. Sales mix is the ratio of one product to another.

2. See Cornerstone 16.5.

3. Prepare a contribution-margin-based income statement for Vandenberg, Inc., based on the unit sales calculated in Requirement 2. If an amount is zero, enter "0". Enter any negative product margin and losses with a minus sign. Do not round intermediate calculations. Round your final answers to nearest dollar.

Vandenberg, Inc. Contribution-Margin-Income Statement For the Coming Year

	Ceiling Fans	Table Fans	Total
Common fixed expensesContribution marginDirect fixed expensesProduct marginSalesSales	$Sales	$Sales	$Sales
Less: Common fixed expensesLess: Direct fixed expensesLess: Product marginLess: SalesLess: Variable expensesLess: Variable expenses	Less: Variable expenses	Less: Variable expenses	Less: Variable expenses
Common fixed expensesContribution marginProduct marginSalesVariable expensesContribution margin	$Contribution margin	$Contribution margin	$Contribution margin
Less: Common fixed expensesLess: Contribution marginLess: Direct fixed expensesLess: SalesLess: Variable expensesLess: Direct fixed expenses	Less: Direct fixed expenses	Less: Direct fixed expenses	Less: Direct fixed expenses
Common fixed expensesDirect fixed expensesProduct marginSalesVariable expensesProduct margin	$Product margin	$Product margin	$Product margin
Less: Common fixed expensesLess: Contribution marginLess: Direct fixed expensesLess: Product marginLess: Variable expensesLess: Common fixed expenses			Less: Common fixed expenses
Common fixed expensesContribution marginDirect fixed expensesOperating incomeOperating lossOperating income			$Operating income

Feedback

Calculate Sales, Variable Expenses, Contribution Margin and direct fixed expenses for each product then add them together. Dont forget to factor in common fixed expenses.

4. What if Vandenberg, Inc., wanted to earn operating income equal to $12,000? Calculate the number of ceiling fans and table fans that must be sold to earn this level of operating income. (Hint: Remember to form a package of ceiling fans and table fans based on the sales mix and to first calculate the number of packages to earn an operating income of $12,000.) Round your intermediate calculations and final answers to nearest number.

Break-even ceiling fans	fill in the blank d23cd50b005dfe9_1
Break-even table fans	fill in the blank d23cd50b005dfe9_2

Feedback

Add the desired operating income to fixed costs in order to calculate the number of units needed.