Smitten Company , a wholesale distributor , has been operating for only a few months . The company sells three products - sinks , mirrors , and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows : 

Sinks: (Units=1000; Percentage=50%)

Mirrors: (Units= 500; Percentage= 25%)

Vanities : (Units= 500; Percentage= 25%)

Total Units : (Units= 2000; percentage= 100%)

PRODUCT: SINKS

Percentage of total sales: 48%

Sales: $300000; 100.00%

Variable expenses: $68000; 22.67%

Contribution margin: 232000; 77.33%

Contribution margin per unit: $232.00

PRODUCT: MIRRORS

Percentage of total sales: 20%

Sales : $125000; 100%

Variable expenses : $62000; 49.60%

Contribution margin : $63000; 50.40%

Contribution margin per unit: $126.00

PRODUCT: VANITIES

Percentage of total sales: 32%

Sales : $200000; 100%

Variable expenses : $88000; 44.00%

Contribution margin: $112000; 56.00%

Contribution margin per unit: $224.00

TOTAL:

Percentage of total sales: 100%

Sales: $625000; 100%

Variable expenses: $220800; 35.33%

Contribution margin : $404200; 64.67%

Fixed expenses: $365300

Operating income: $38900

Break - even point in sales dollars= Fixed expenses/ Overall CM ratio= $ 365,300 / 0.65 = $ 564,850.32

Break - even point in unit sales :

Total Fixed expenses / Weighted - average CM per unit = 365300/ 203.50 * = 1,795.09 units

* ( $ 232.00 x 0.50 ) + ( $ 126.00 x 0.25 ) + ( $ 224.00 0.25 )

As shown by these data , operating income is budgeted at $ 38,900 for the month , break - even sales dollars at $ 564,850.32 , and break even unit sales at 1,795.09 .

Assume that actual sales for the month total $ 630,000 ( 2,100 units ) , with the CM ratio and per unit amounts the same as budgeted . Actual fixed expenses are the same as budgeted , $ 365,300 . Actual sales by product are as follows : sinks , $ 157,500 ( 525 units ) ; mirrors , $ 262,500 ( 1,050 units ) ; and vanities , $ 210,000 ( 525 units ) .

Required :

A. Prepare a contribution format income statement for the month based on actual sales data . ( Round your answers to 2 decimal places . )

B. Compute the break - even point in sales dollars for the month , based on the actual data . ( Round your percentage answers to nearest whole percent . Round other intermediate values and final answer to the nearest whole dollar . )

C. Calculate the break - even point in unit sales for the month , based on the actual data . ( Do not round your intermediate calculations . Round your final answer to the nearest whole number . )

Q2.

Alliance Enterprises is considering extensively modifying their manufacturing equipment . The modifications will result in less wastage of materials , which will reduce variable manufacturing costs and introduce changes to the production process that will improve product quality . This will allow Alliance to increase the selling price of the product . Annual fixed costs are expected to increase to $ 210,000 if the modifications are made . Expected fixed and variable costs as well as the selling prices are shown below:

Cost Item:

Selling price per unit: (Existing equipment: $ 38; modified equipment: $ 40)

Variable cost per unit: (Existing equipment: $ 34; modified equipment: $ 34)

Fixed costs: (existing equipment: 100000; modified equipment: 210000)

REQUIRE:

A. Determine the sales level in units at which the modified equipment will achieve a 5 % target profit - to - sales ratio ( ignore taxes ) .

B. Determine the sales level in units at which the modified equipment will achieve $ 189,000 in after - tax operating income . Assume a tax rate of 30% .

C. Determine the sales level at which profits will be the same for either the existing or modified equipment .