Cat fur Company has fixed costs of $300,000. It produces two products, X and Y Product has a van able cost percentage equal to 60% of its $10 per unit selling price Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. What is Cat furs breakeven point in dollars?
Answer(s): D
A helpful approach in a multiproduct situation is to make calculations based on the composite unit, i.e.. 2 units of Product X and 3 units of Product Y (a 66% ratio). The selling price of this composite unit is $110 [(2 $10) + (3 x $30)]. The UCM of the composite unit is $35 fJ2 x ($10-- $6)] + [3 x ($30-- $2 1)11. Consequently, the breakeven point in composite units is 8,571.43 ($300,000 FC. $35 UCM), and the breakeven point in sales dollars is $942,857 (8.571 43 x $110)
Cat fur Company has fixed costs of $300.000. It produces two products, X and Y Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. How many units of Product Y will Cat fur sell at the breakeven point?
A composite unit was destined as consisting of 2 units of Product X and 3 units of roduct Y. The breakeven point in composite units is 8,571 A3. According, the units of Product V sold at the breakeven point are equal to 25.714(8.571.43 x 3).
Cat fur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price Product Y has a variable cost percentage equal to 70% of its $30 selling price For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change. Assume that Cat fur Company achieved its planned breakeven level of sales in dollars, but the mix of products sold was one-to- one. All actual costs and unit selling prices equaled budgeted amounts. What is the impact on profitability?
Answer(s): B
The expected sales mix is 40% for Product X and 60% for Product V). Given that Product X has a 40% contribution margin ratio and Product V has a 30% contribution margin ratio, selling more of Product X and less of Product V increases the average contribution margin ratio. The effect is to lower the breakeven point Thus, if the new composite unit includes 2 units of Product X and 2 units of Product V). the composite unit selling price is $80 [(2 x $10) + (2 x $30)]. and the composite UCM is $26 {J2 x ($10 --$6)] + (2 x ($30-- $21)D, The new breakeven point in composite units is therefore 11.53846 ($300,000 FC · $26 UCM). and the new breakeven point in sales dollars is $923,077 (11.538.46 x $80) Given that sales reached the budgeted breakeven point of $942,857, Cat fur must have made a profit of $19,780 ($942,857 -- $923,077).
A company wants to open a new store in one of three nearby shopping malls. In Mall A. the rent will be $300,000 per year. In Mall B. the rent will be 4% of gross revenues In Mall C. the rent will be $150,000 per year pius 3% of gross revenues. Assume that revenues and and other elements under consideration are the same for all three malls.Which mall should the company choose it revenues are expected to be $6,000,000 per year?
Answer(s): C
The answer depends on the expected level of revenues. If the company expects revenues to be $6,000,000 per year, the calculation is as follows:Mall A: $300.000Mall B $6,000,000 x 4% = $240,0001Mall C: $6,000,000 x 3% $180000 + $150,000 $330.000 Thus, Mall B is preferable
company wants to open a new store in one of three nearby shopping malls. In Mall A, the rent will be $300,000 per year. In 4alI B, the rent will be 4% of gross revenues. In Mall C, the rent will be $150,000 per year pIus 3% of gross revenues Assume hat revenues and all other elements under consideration are the same for all three malls. If the company expects revenues to be $ 10.000.000 per year. which mall should be chosen?
It the company expects revenues to be $10,000,000 per year. the calculation is as follows.Mall A. $300.000Mall B: $10,000,000 x 4% = $400,000Mall C: $10,000.000 x 3% $300,000 + $150.000 $450,000 Thus, Mall A is preferable
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