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Multiple$-$Product Break$-$even, Break$-$Even Sales Revenue

Andrews Sporting Goods, Inc., produces and sells children's softball mitts: vinyl mitts and basic leather mitts. Last year, Andrews sold $24,000$ vinyl mitts and $12,000$ leather mitts. Information on the two products is as follows:

Line Item Description Vinyl Mitts Leather Mitts

Price $$10$ $$16$

Variable cost per unit $610$

Total fixed cost is $$93,500.$

Suppose that in the coming year, the company plans to produce an autographed mitt. The company estimates that $6,000$ autographed mitts can be sold at a price of $$20$ and a variable cost per unit of $$12.$ Total fixed cost must be increased by $$17,800($making total fixed cost $$111,300).$ Assume that anticipated sales of the other products, as well as their prices and variable costs, remain the same.

Unless otherwise instructed, round all total dollar figures $($e$.$g$.,$ sales, total contribution margin$)$ to the nearest dollar, breakeven or target units to the nearest unit, and unit costs and unit contribution margins to the nearest cent. Round ratios to four significant digits.

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Question Content Area

$1.$ What is the sales mix of vinyl mitts, leather mitts, and autographed mitts?

$4$:$2$:$1$

$2.$ Compute the break$-$even quantity of each product. $($Round break$-$even packages to four significant digits and break$-$even units to the nearest whole unit.$)$

Line Item Description Answer

Break$-$Even Vinyl Mitts fill in the blank $2$ of $7$

$57\mathrm{.}14$

units

Break$-$Even Leather Mitts fill in the blank $3$ of $7$

$28\mathrm{.}57$

units

Break$-$Even Autographed Mitts fill in the blank $4$ of $7$

$14\mathrm{.}29$

units

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$1.$ See text section "Determining the Sales Mix."

Question Content Area

$3$a$.$ Prepare an income statement for Andrews Sporting Goods, Inc. for the coming year.

Andrews Sporting Goods Inc.

Income Statement

For the Coming Year

Line Item Description Amount

Sales

$Sales

$564,000$

Total variable cost

Total variable cost

$336,000$

Contribution margin

$Contribution margin

$228,000$

Total fixed cost

Total fixed cost

$120,840$

Operating income

$Operating income

$107,160$

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$3$a$.$ Prepare contribution margin income statement.

Question Content Area

$3$b$.$ What is the overall contribution margin ratio? Use the contribution margin ratio to compute overall break$-$even sales revenue. $($Note: Round the contribution margin ratio to two decimal places; round the break$-$even sales revenue to the nearest dollar.$)$

Line Item Description Answer

Overall contribution margin ratio fill in the blank $5$ of $7$

$40$

$\%$

Overall break$-$even sales revenue fill in the blank $6$ of $7$$

$298,538$

$4.$ Compute the margin of safety for the coming year in sales dollars.

fill in the blank $7$ of $7$$

$265,462$

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