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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 1-5.)
wC6
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 $26.50
Sale of valves ,1,480,000 units at $11.20
Sale of controllers ,60,000 units at $42.50
Unit variable manufacturing costs:
Valves $7.95
Controllers $29.75
Fixed manufacturing overhead cost (total) $760,000
Unit variable selling and administrative expense for:
Valves $0.50
Controllers $3.41
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: $9.75
Unit sales price: $42.50
Fixed manufacturing overhead cost (per month for controllers): $81,000
Unit variable selling and administrative costs: $3.00
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?
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