Waterways

$($This is a continuation of the Waterways case from Chapters $1-5.)$

wC$6$

This problem asks you to perform break$-$even analysis based on Waterways' sales mix and

to make sales mix decisions realted to Waterways's use of its productive facilities.

Part $1$

Waterways has a sales mix of sprinklers, valves, and controllers as follows.

Annual expected sales:

Sale of sprinklers $,460,000$ units at $$26\mathrm{.}50$

Sale of valves $,1,480,000$ units at $$11\mathrm{.}20$

Sale of controllers $,60,000$ units at $$42\mathrm{.}50$

Unit variable manufacturing costs:

Valves $$7\mathrm{.}95$

Controllers $$29\mathrm{.}75$

Fixed manufacturing overhead cost $($total$)$ $$760,000$

Unit variable selling and administrative expense for:

Valves $$0\mathrm{.}50$

Controllers $$3\mathrm{.}41$

Fixed selling and administrative expenses $($total$)$ $$1,600,000$

Instructions

$($a$)$ Determine the sales mix based on unit sales for each product.

$($b$)$ Using the annual expected sales for these products, determine the weighted$-$average

unit contribution margin for these three products. $($Round to two decimal places.$)$

$($c$)$ Assuming the sales mix remains the same, what is the break$-$even point in sales units

for these products?

Part $2$

Waterways packages some of its products into sets for home installations. One set's $($small$)$

unit sales price is $$77$ with unit variable costs of $$50.$ Another set's $($large$)$ unit sales price

is $$152$ with unit variable costs of $$100.$ The parts for the $$77$ set take $9$ machine hours to

produce. The parts for the $$150$ set take $20$ machine hours to produce.

Instructions

Given the information above, and assuming all of the package sets produced can be sold

each month, illustrate the best use of machine hours.

Part $3$

The section of Waterways that produces controllers for the company provided the fol$-$

lowing information.

Sales for month of February: $4,000$

Unit variable manufacturing cost: $$9\mathrm{.}75$

Unit sales price: $$42\mathrm{.}50$

Fixed manufacturing overhead cost $($per month for controllers$)$: $$81,000$

Unit variable selling and administrative costs: $$3\mathrm{.}00$

Fixed selling and administrative expenses $($per month for controllers$)$: $$13,122$

Instructions

$($a$)$ Using this information for the controllers, determine the contribution margin ratio,

the degree of operating leverage, the break$-$even point in sales dollars, and the margin

of safety ratio for Waterways Corporation on this product.

$($b$)$ What does this information suggest if Waterways' cost structure is the same for the

company as a whole?