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Waterways ( This is a continuation of the Waterways case from Chapters 1 - 5 . ) wC 6 This problem asks you to perform
Waterways
This is a continuation of the Waterways case from Chapters
wC
This problem asks you to perform breakeven analysis based on Waterways' sales mix and
to make sales mix decisions realted to Waterways's use of its productive facilities.
Part
Waterways has a sales mix of sprinklers, valves, and controllers as follows.
Annual expected sales:
Sale of sprinklers units at $
Sale of valves units at $
Sale of controllers units at $
Unit variable manufacturing costs:
Valves $
Controllers $
Fixed manufacturing overhead cost total $
Unit variable selling and administrative expense for:
Valves $
Controllers $
Fixed selling and administrative expenses total $
Instructions
a Determine the sales mix based on unit sales for each product.
b Using the annual expected sales for these products, determine the weightedaverage
unit contribution margin for these three products. Round to two decimal places.
c Assuming the sales mix remains the same, what is the breakeven point in sales units
for these products?
Part
Waterways packages some of its products into sets for home installations. One set's small
unit sales price is $ with unit variable costs of $ Another set's large unit sales price
is $ with unit variable costs of $ The parts for the $ set take machine hours to
produce. The parts for the $ set take 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
The section of Waterways that produces controllers for the company provided the fol
lowing information.
Sales for month of February:
Unit variable manufacturing cost: $
Unit sales price: $
Fixed manufacturing overhead cost per month for controllers: $
Unit variable selling and administrative costs: $
Fixed selling and administrative expenses per month for controllers: $
Instructions
a Using this information for the controllers, determine the contribution margin ratio,
the degree of operating leverage, the breakeven 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?
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