3-21 Breakeven analysis; multiproduct CVP analysis (LO1, 5)Kitchenware, Inc., sells two types of water...3-21...

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Accounting

3-21 Breakeven analysis; multiproduct CVP analysis (LO1, 5)
Kitchenware, Inc., sells two types of water pitchers, plasticand glass. Plastic pitchers cost the company $15 and are sold for$30. Glass pitchers cost $24 and are sold for $45. All other costsare fixed at $982,800 per year. Current sales plans call for 14,000plastic pitchers and 42,000 glass pitchers to be sold in the comingyear.
Required
a. How many pitchers of each type must be sold to break even inthe coming year?
b. Kitchenware, Inc., has just received a sales catalog from anew supplier that is offering plastic pitchers for $13. What wouldbe the new breakeven point if managers switched to the newsupplier?

Answer & Explanation Solved by verified expert

4.1 Ratings (617 Votes)

A	Break Even Units
	Fixed Cost/Contribution Per Unit=$982800/$19.5=50400 Units

	*19.5 See Below
	Contribution=Sales-variable cost
	Plastic Contribution=$30-$15=$15
	Glass Contribution=$45-$24=$21

	When two units given then we need to find out weighted average contribution

	Therefore
	Plastic Pitchers 14000
	Glass Picturers 42000
	Total 56000

	Percentage of Plastic Pitchers out of total Pitchers=14000/56000=25%
	Percentage of Glass Pitchers out of total Pitchers=42000/56000=75%


	Weighted average contribution
	Plastic Pitchers Contribution .25 + Glass Pitchers Contribution.75
	150.25 +21 .75=$19.5




B	Particulars	Amount
	Sales(plastic)	$30
	Less:Variable cost	-13
	Contribution Per Unit	$17


	Weighted average contribution
	Plastic Pitchers Contribution .25 + Glass Pitchers Contribution.75
	170.25 +21 .75=$20

	Break Even Units if switches to new supplier
	Fixed Cost/Contribution Per Unit=$982800/$20=49140 Units

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In: Accounting3-21 Breakeven analysis; multiproduct CVP analysis (LO1, 5)Kitchenware, Inc., sells two types of water...3-21 Breakeven analysis; multiproduct CVP analysis (LO1, 5)Kitchenware, Inc., sells two types of water pitchers, plasticand glass. Plastic pitchers cost the company $15 and are sold for$30. Glass pitchers cost $24 and are sold for $45. All other costsare fixed at $982,800 per year. Current sales plans call for 14,000plastic pitchers and 42,000 glass pitchers to be sold in the comingyear.Requireda. How many pitchers of each type must be sold to break even inthe coming year?b. Kitchenware, Inc., has just received a sales catalog from anew supplier that is offering plastic pitchers for $13. What wouldbe the new breakeven point if managers switched to the newsupplier?