Problem 5-28 (Algo) Sales Mix; Multiproduct Break-Even Analysis [LO5-9]

Topper Sports, Incorporated, produces high-quality sports equipment. The companys Racket Division manufactures three tennis racketsthe Standard, the Deluxe, and the Prothat are widely used in amateur play. Selected information on the rackets is given below:

	Standard	Deluxe	Pro
Selling price per racket	$ 45.00	$ 70.00	$ 100.00
Variable expenses per racket:
Production	$ 27.00	$ 35.00	$ 36.00
Selling (5% of selling price)	$ 2.25	$ 3.50	$ 5.00

All sales are made through the companys own retail outlets. The Racket Division has the following fixed costs:

	Per Month
Fixed production costs	$ 138,000
Advertising expense	118,000
Administrative salaries	68,000
Total	$ 324,000

Sales, in units, over the past two months have been as follows:

	Standard	Deluxe	Pro	Total
April	2,000	1,000	5,000	8,000
May	8,000	1,000	3,000	12,000

Required:

1-a. Prepare contribution format income statements for April.

1-b. Prepare contribution format income statements for May.

3. Compute the Racket Divisions break-even point in dollar sales for April.

4. Will the break-even point would be higher or lower with Mays sales mix than with Aprils sales mix?

5. Assume that sales of the Standard racket increase by $21,800. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $21,800? Do not prepare income statements; use the incremental analysis approach in determining your answer.

Reg 1A Reg 1B Reg 3 Reg 4 Reg 5 Prepare contribution format income statements for April. (Round "Total percent" answers to 1 decimal place) Topper Sports, Incorporated Income Statement for April Deluxe Standard Pro Total Amount % Amount % Amount % Amount % Variable expenses: Total variable expenses 0 0 0 0 0 0 0 0.0 $ 0 0 S 0 0 S 0 0 $ 0 0.0 Fixed expenses Total fixed expenses 0 0 Reg 1A Reg 1B Reg 3 Reg 4 Reg 5 Prepare contribution format income statements for May. (Round "Total percent" answers to 1 decimal place) Topper Sports, Incorporated Income Statement for May Deluxe Standard Pro Total Amount % Amount % Amount % Amount % Variable expenses: Total variable expenses 0 0 0 0 0 0 0 0.0 0 0 S 0 0 $ 0 0 $ 0 0.0 Fixed expenses Total fixed expenses 0 S 0 Reg 1A Req 1B Reg 3 Reg 4 Reg 5 Compute the Racket Division's break-even point in dollar sales for April. (Round intermediate percentage calculations to 1 decimal place and final answer to the nearest whole dollar.) Break-even point in dollar sales Reg 1A Reg 1B Reg 3 Reg 4 Reg 5 Whether the break-even point would be higher or lower with May's sales mix than with April's sales mix? Higher Lower Reg 1A Reg 1B Reg 3 Reg 4 Reg 5 Assume that sales of the Standard racket increase by $21,800. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $21,800? Do not prepare income statements; use the incremental analysis approach in determining your answer. Standard Pro Effect on Net operating income