- 7-3A Multi-product CVP Awesome Axes sells electric guitars. The company sells three models of guitar: Enthusiast, Jammer and Pro. Information relating to next year's budget for the three models follows: Expected sales (units) Sales price Variable cost Enthusiast Jammer Pro 600 350 50 $200 $500 $3,000 $120 $200 $800 The company has annual fixed costs of $200,000 and a tax rate of 25%. Required: a.) Compute the company's expected profit (net income) for the upcoming fiscal period. b.) Compute the company's sales mix.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
7-3A - Multi-product CVP
Awesome Axes sells electric guitars. The company sells three models of guitar: Enthusiast, Jammer and Pro.
Information relating to next year's budget for the three models follows:
Enthusiast
Jammer
Pro
Expected sales (units)
600
350
50
Sales price
$200
$500
$3,000
Variable cost
$120
$200
$800
The company has annual fixed costs of $200,000 and a tax rate of 25%.
Required:
a.) Compute the company's expected profit (net income) for the upcoming fiscal period.
b.) Compute the company's sales mix.
c.) Assuming a consistent sales mix, how many units of each product type must the company sell to break even?
d.) Assuming a consistent sales mix, if the company wishes to earn net income of $300,000, how many units of each product type must be sold?
e.) Compute the margin of safety in both dollar and percentage terms.
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