Question 8: Calculating CVP

Leghorn Chicken Limited presently produces doors and tables for the UAE and Jordan markets but is looking to expand to cover a greater international range.

The key planned financial information related to the companys key products for 2022 are as follows:

Activity	Doors	Tables
Selling Price	$215.90	$255.90
Direct Material (per unit)	$40.01	$115.11
Direct Labour (per unit)	$14.50	$36.50
Variable Manufacturing Overhead (per unit)	$28.73	$12.73
Variable Selling Expense (per unit)	$12.98	$29.98
Fixed Manufacturing Overhead (total)	$111,158,000	$119,698,000
Fixed Administrative Overhead (total)	$88,222,000	$223,578,000
Fixed Marketing Overhead(total)	$199,260,000	$79,555,000

The company has a sales mix ratio of 5:3. The company has estimated that in 2022 they will produce and sell 80,000 total units.

Required:

1. Calculate the contribution margin per unit and the contribution ratio for Leghorn Chicken Limited based on production and sales estimates for 2022 and based on the sales mix of 5:3.

2. Calculate the total number of units that are required to be sold in 2022 in order for Leghorn Chicken Limited to breakeven given the 5:3 sales mix ratio.

3. Calculate the total sales revenue Leghorn Chicken Limited would achieve at the breakeven quantity given the 5:3 sales mix ratio and projected production and sales estimates for 2022.

4. Assume in 2022 the minimum net income Leghorn Chicken Limited wishes to achieve is $58,000,000. Given the sales mix ratio of 5:3, what is the revenue Leghorn Chicken Limited would generate to ensure achieve the desired minimum net income and the number of doors and tables to be sold?