Operating income $ 900.00 Brief explanation: 2. Save a copy of your original model to a new spreadsheet called "new sales mix". Say the monthly sales volume is now expected to be 175 "Treat-times" and 125 "Launch-its" (same total units, but a different sales mix). What is the new operating income? What is the new WACM/unit? Given this sales mix, how many units (in total) will Jake need to sell to earn his target profit? Briefly explain your findings to the client. WACM/unit $ 8.00 Units to earn target profit Jake's Pet Supplies Pro Forma Contribution Margin Income Statement For the month ending June 30 6.00 60% Total Calculation of Weighted average CM per unit Product #1 Product #2 1,200.00 $ 1,200.00 $ 200 100 $ 2,400.00 300 ASSUMPTIONS Product #1: Sales price per unit Variable costs per unit: Commision Launch cost per unit Shipping and handling Total variable cost per unit Product #1 Launch-it Launch-it Unit CM $ $ 10.00 ||CM % Breakeven point: $ $ 1.00 -in units $ $ 1.00 -in sales revenue $ $ 2.00 S 4.00 Target profit volume: -in units $ $ 200.00 -in sales revenue $ $ 6.00 $ 12.00 $ 8.00 250.00 Product #1 Product #2 2,500.00 || Sales revenue $ 2,000.00 $ 3,000.00 $ minus variable costs: Commisions $ 200.00 $ 300.00 S 1,583.33 Shipping and handlings 400.00 $ 800.00 $ 15,833.33 || Purchase cost $ 200.00 $ 700.00 $ Total Variable costs $ 800.00 $ 1,800.00 $ Monthly volume Product #2 Total Product #1 $ S S $ Contribution Margin Sales units Total Contribution Margin 5,000.00 WACM/unit 500.00 1,200.00 900.00 2,600.00 | Multiproduct Breakeven point: Units 2,400.00 Breakeven units Price per unit Sales revenue at breakeven 500.00 1,000.00 Multiproduct Target profit point: 1,500.00 Units Target profit 900.00 Price per unit Sales revenue at target profit 48% 200.00 125.00 $ $ 300.00 188.00 $ 1,200.00 $ 1,200.00 $ Product #2: Sales price per unit Variable costs per unit: Commison Treat cost per unit Shipping and handling Total variable cost per unit Treat-time $ Treat-time $ 30.00 Product #2 Unit CM $ 3.00 CM % $ 7.00 Breakeven point: $ 8.00 -in units $ 18.00 -in sales revenue $ $ $ $ 100.00 63.00 30.00 1,890.00 10.00 1,250.00 $ $ 3,140.00 Contribution Margin 12.00 40% Fixed costs: Entry fees 125.00 || Salary 3,750.00 || Total fixed costs: $ $ Total $ S $ 200.00 Product #1 $ $ $ $ 792.00 Product #2 $ 100.00 $ 396.00 $ 30.00 $ 11,880.00 $ $ S Monthly volume 300.00 1,188.00 40.00 19,800.00 $ 10.00 7,920.00 $ Operating income 791.67 23,750.00 || WACM% $ $ $ 100.00 Target profit volume: -in units -in sales revenue $ 1,000.00 $ 500.00 $ 1,500.00 Fixed costs per month: Salary Entry fee Total fixed costs per month Margin of Safety (in $) $ 1,860.00 Target profit per month $ 8,000.00 Margin of Safety % 37.20% Expected change in volume (%) 5.00% Operating Leverage Factor $ 2.67 Expected % change in operating income (%) 13.33% Operating income $ 900.00 Brief explanation: 2. Save a copy of your original model to a new spreadsheet called "new sales mix". Say the monthly sales volume is now expected to be 175 "Treat-times" and 125 "Launch-its" (same total units, but a different sales mix). What is the new operating income? What is the new WACM/unit? Given this sales mix, how many units (in total) will Jake need to sell to earn his target profit? Briefly explain your findings to the client. WACM/unit $ 8.00 Units to earn target profit Jake's Pet Supplies Pro Forma Contribution Margin Income Statement For the month ending June 30 6.00 60% Total Calculation of Weighted average CM per unit Product #1 Product #2 1,200.00 $ 1,200.00 $ 200 100 $ 2,400.00 300 ASSUMPTIONS Product #1: Sales price per unit Variable costs per unit: Commision Launch cost per unit Shipping and handling Total variable cost per unit Product #1 Launch-it Launch-it Unit CM $ $ 10.00 ||CM % Breakeven point: $ $ 1.00 -in units $ $ 1.00 -in sales revenue $ $ 2.00 S 4.00 Target profit volume: -in units $ $ 200.00 -in sales revenue $ $ 6.00 $ 12.00 $ 8.00 250.00 Product #1 Product #2 2,500.00 || Sales revenue $ 2,000.00 $ 3,000.00 $ minus variable costs: Commisions $ 200.00 $ 300.00 S 1,583.33 Shipping and handlings 400.00 $ 800.00 $ 15,833.33 || Purchase cost $ 200.00 $ 700.00 $ Total Variable costs $ 800.00 $ 1,800.00 $ Monthly volume Product #2 Total Product #1 $ S S $ Contribution Margin Sales units Total Contribution Margin 5,000.00 WACM/unit 500.00 1,200.00 900.00 2,600.00 | Multiproduct Breakeven point: Units 2,400.00 Breakeven units Price per unit Sales revenue at breakeven 500.00 1,000.00 Multiproduct Target profit point: 1,500.00 Units Target profit 900.00 Price per unit Sales revenue at target profit 48% 200.00 125.00 $ $ 300.00 188.00 $ 1,200.00 $ 1,200.00 $ Product #2: Sales price per unit Variable costs per unit: Commison Treat cost per unit Shipping and handling Total variable cost per unit Treat-time $ Treat-time $ 30.00 Product #2 Unit CM $ 3.00 CM % $ 7.00 Breakeven point: $ 8.00 -in units $ 18.00 -in sales revenue $ $ $ $ 100.00 63.00 30.00 1,890.00 10.00 1,250.00 $ $ 3,140.00 Contribution Margin 12.00 40% Fixed costs: Entry fees 125.00 || Salary 3,750.00 || Total fixed costs: $ $ Total $ S $ 200.00 Product #1 $ $ $ $ 792.00 Product #2 $ 100.00 $ 396.00 $ 30.00 $ 11,880.00 $ $ S Monthly volume 300.00 1,188.00 40.00 19,800.00 $ 10.00 7,920.00 $ Operating income 791.67 23,750.00 || WACM% $ $ $ 100.00 Target profit volume: -in units -in sales revenue $ 1,000.00 $ 500.00 $ 1,500.00 Fixed costs per month: Salary Entry fee Total fixed costs per month Margin of Safety (in $) $ 1,860.00 Target profit per month $ 8,000.00 Margin of Safety % 37.20% Expected change in volume (%) 5.00% Operating Leverage Factor $ 2.67 Expected % change in operating income (%) 13.33%
