12 points Bleeker Street Company produces and sells two and

(12 points) Bleeker Street Company produces and sells two and the Traditionalist. The following monthly data are provided: 2. lines of business suits, the Contemporary Contemporary Traditionalist Estimated unit sales per month Selling price Variable manufacturing costs Variable selling and administrative costs 1,000 500 200 S 10 100 10 10 Budgeted net income is $45,000 per month. Required: 1) Calculate the monthly break-even sales in units and dollars based on the budgeted sales mix. 2) Calculate the firm\'s overall margin of safety in dollars. 3) Compute the firm\'s profit assuming 1,500 units are sold in a 1:1 sales mix. Show all workings!

Solution

Contemporary Traditionalist Selling Price (A) 200 175 Variable manufacturing cost (B) 110 100 Contribution (C=A-B) 90 75 No of units to be sold (D) 500 1000 % of total units (\'E)                                33.33                                  66.67 (500/(500+100))*100 (1000/(500+100))*100 Weighted average Contribution                                30.00                                  50.00 (F=C*E) Sum of Weighted Average Contribution                                80.00 Contemporary Traditionalist Total Sales In Dollars (G=A*D) 100000 175000 275000 Variable Manufacturing cost (H=B*D) 55000 100000 155000 Contribution (I=G-H) 45000 75000 120000 Variable Selling and administrative cost (J) 5000 10000 15000 (10*500) (10*1000) Income before fixed cost (K=I-J) 105000 Budgeted Income (L) 45000 Fixed Cost (M=K-L) 60000 Break Even Point in Units = Total Fixed Cost / Weighted Average Cm = 60000/80 =                                   750 units Contemporary Traditionalist Sales Mix Ratio 33.33% 66.67% Units at Break Even Point (N)                                   250 500 (750*33.33%) (750*66.67%) Price per unit (O) 200 175 Break even Sales in dollars (P=N*O)                             49,995                                87,504 Total Break Even Sales in Dollars                           137,499 (49995+87504) 2) Contemporary Traditionalist Selling Price (A) 200 175 No of Units (B) 500 1000 Sales in dollars (C=A*B) 100000 175000 Total Sales (100000+175000) 275000 Break Even sales 137499 Margin of safety= ((Current Sales Revenue - Breakeven point)/Current Sales Revenue) x 100 = (275000-137499)/275000*100 = 50% 3) Contemporary Traditionalist Total No of Units (A) 750 750 (1500/2) (1500/2) Selling Price (B) 200 175 Sales (C=A*B) 150000 131250 281250 Variable manufacturing cost 82500 75000 157500 Contribution 67500 56250 123750 Variable selling and adminitrative cost per unit 7500 7500 15000 Fixed Cost 60000 Net Income 48750