Question 1 (Total: 30 marks)

Tabulation Corporation manufactures and sells two types of electronic calculators: EL-520 W and EL-620 T. The following data was gathered from last months activities:

EL-520 W EL-620 T

Sales in units 5,000 3,000

Selling price per unit $50 $100

Variable production costs per unit $10 $26

Traceable fixed production costs $100,000 $150,000

Variable selling expenses per unit $5 $6

Traceable fixed selling expenses $5,000 $7,500

Allocated division administrative expenses $50,000 $60,000

Required:

1. Prepare a segmented income statement in the contribution format for last month, showing both "Amount" and "Percent" columns for the company as a whole and for each model.
2. Why might it be very difficult to calculate separate break-even sales for each model?
3. Refer to the original data and, if necessary, the results of the segmented income statement prepared in part (1) above. Calculate the total break-even sales (in both units AND dollars) for last month, assuming that none of the fixed production costs and fixed selling expenses is traceable. Allocate the total break-even sales between the two models.
4. Again, refer to the original data and, if necessary, the results of the segmented income statement prepared in part (1) above. Calculate the total break-even sales (in both units AND dollars) for last month, assuming that the "allocated" amounts of the company's administrative expenses are actually traceable. Allocate the total break-even sales between the two models.
5. How reasonable are the total break-even sales numbers calculated in parts (3) and (4) given the actual results for last month?