Question
Problem 21-4A (Algo) Break-even analysis, different cost structures, and income calculations LO C2, A1, P2 Skip to question [The following information applies to the questions
Problem 21-4A (Algo) Break-even analysis, different cost structures, and income calculations LO C2, A1, P2
Skip to question
[The following information applies to the questions displayed below.]
Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 49,000 units of each product. Income statements for each product follow.
| Carvings | Mementos | |
|---|---|---|
| Sales | $ 837,900 | $ 837,900 |
| Variable costs | 670,320 | 83,790 |
| Contribution margin | 167,580 | 754,110 |
| Fixed costs | 30,580 | 617,110 |
| Income | $ 137,000 | $ 137,000 |
Problem 21-4A (Algo) Part 1
Required:
1. Compute the break-even point in dollar sales for each product.
Note: Enter CM ratio as percentage rounded to 2 decimal places.
| PRODUCT CARVINGS | ||||
| Contribution Margin Ratio | ||||
| Numerator: | / | Denominator: | ||
| / | = | Contribution margin ratio | ||
| 0 | ||||
| Break-Even Point in Dollars | ||||
| Numerator: | / | Denominator: | ||
| / | = | Break-even point in dollars | ||
| 0 | ||||
| PRODUCT MEMENTOS | ||||
| Contribution Margin Ratio | ||||
| / | = | Contribution margin ratio | ||
| 0 | ||||
| Break-Even Point in Dollars | ||||
| / | = | Break-even point in dollars | ||
| 0 | ||||
Assume that the company expects sales of each product to decline to 32,000 units next year with no change in unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products).
| HENNA COMPANY | ||||||
| Contribution Margin Income Statement | ||||||
| Units | Carvings | Mementos | Total | |||
| $ Per unit | Total | $ Per unit | Total | |||
| Contribution margin | ||||||
| Income (loss) | ||||||
Assume that the company expects sales of each product to increase to 63,000 units next year with no change in unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products).
| HENNA COMPANY | ||||||
| Contribution Margin Income Statement | ||||||
| Units | Carvings | Mementos | Total | |||
| $ Per unit | Total | $ Per unit | Total | |||
| $ 0 | $ 0 | $ 0 | ||||
| 0 | 0 | 0 | ||||
| Contribution margin | ||||||
| 0 | ||||||
| Income (loss) | $ 0 | $ 0 | $ 0 | |||
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Strategic Market Management
Authors: David A. Aaker
4th Edition
0471309567, 9780471309567
