1 Lambardi Company sells 3 types of bags Bag A sells for 19

1. Lambardi Company sells 3 types of bags. Bag A sells for $19 and has variable cost of $9.00 per unit. Bag B sells for $17 and has variable cost of $12.00 per unit. Bag C sells for $8 and has variable costs of $6.00 per unit. Lambardi sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Lambardi?

2. Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $76,200. Swimkids expects sales of $267,000 next year. What is Swimkids\'s margin of safety?

Solution

1.

Weighted average contribution = (19-9)*(2/10) + (17-12)*(3/10) + (8-6)*(5/10) = 4.5

2.

a. Margin of Safety = Actual sales - Sales at BEP

b. Sales at BEP = Number of units*Selling Price

c. Number of units = Fixed Costs / Contribution per unit

= 76200/(30-18)

= 6350

b. Sales at BEP = 6350*30 = $190500

c. Margin of Safety = $ 267000 - $ 190500 = $ 76500