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On-the-Go, Inc., produces two models of traveling cases for laptop computers: the Programmer and the Executive....

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Accounting

On-the-Go, Inc., produces two models of traveling cases forlaptop computers: the Programmer and the Executive. The bags havethe following characteristics: Programmer Executive Selling priceper bag $ 70 $ 100 Variable cost per bag $ 30 $ 50 Expected sales(bags) per year 8,000 12,000 The total fixed costs per year for thecompany are $661,000. Required: a. What is the anticipated level ofprofits for the expected sales volumes? b. Assuming that theproduct mix is the same at the break-even point, compute thebreak-even point. (Round your final answer up to the nearest wholeunit.) c. If the product sales mix were to change to nineProgrammer-style bags for each Executive-style bag, what would bethe new break-even volume for On-the-Go? (Round your final answerup to the nearest whole unit.)

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4.2 Ratings (686 Votes)

Answer a Anticipated level of profit
Particulars Amount
Sales- Programmer (8000*70) 560000
           - Executives (12000*100) 1200000
Less: Variable cost
         - Programmer (8000*30) 240000
           - Executives (12000*50) 600000
Contribution 920000
Less: Fixed cost 661000
Net expected profit 259000
Answer b Break even sales with same product mix
= Fixed cost/ Weighted average contribution per unit
= 661000/46
14369.56522 or 14370 units total
Weighted Contribution= Weighted Selling price- Weighted variable cost
                                                = (70*2/5+100*3/5)-(30*2/5+50*3/5)
                                                =(28+60)-(12+30)
                                                =46
Answer c Break even sales with same product mix
= Fixed cost/ Weighted average contribution per unit
= 661000/41
16121.95122 or 16122
Weighted Contribution= Weighted Selling price- Weighted variable cost
                                                = (70*9/10+100*1/10)-(30*9/10+50*1/10)
                                                =(63+10)-(27+5)
                                                =41

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