Biblio Files Company is making plans for its next fiscal year, and decides to sell two new types of bookshelves, Basic and Deluxe. The company has compiled the following estimates for the new product offerings. Type of Sales Price Bookshelf per Unit Basic Deluxe The company is interested in determining how many of each type of bookshelf would have to be sold in order t break even. If we think of the Basic and Deluxe products as components of one overall enterprise product called "Combined," the unit contribution margin for the Combined product would be $2.31. Fixed costs for the upcoming year are estimated at $341,880. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Type of Bookshelf $5.00 9.00 Basic Deluxe Variable Cost per Unit Percent of Sales Mix $1.75 8.10 Break-Even Sales in Units Break-Even Sales in Dollars
Biblio Files Company is making plans for its next fiscal year, and decides to sell two new types of bookshelves, Basic and Deluxe. The company has compiled the following estimates for the new product offerings. Type of Sales Price Bookshelf per Unit Basic Deluxe The company is interested in determining how many of each type of bookshelf would have to be sold in order t break even. If we think of the Basic and Deluxe products as components of one overall enterprise product called "Combined," the unit contribution margin for the Combined product would be $2.31. Fixed costs for the upcoming year are estimated at $341,880. Recall that the totals of all the sales mix percents must be 100%. Determine the amounts to complete the following table. Type of Bookshelf $5.00 9.00 Basic Deluxe Variable Cost per Unit Percent of Sales Mix $1.75 8.10 Break-Even Sales in Units Break-Even Sales in Dollars
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Biblio Files Company: Break-Even Analysis and Target Profit Planning**
Biblio Files Company is planning for the next fiscal year by introducing two new types of bookshelves: Basic and Deluxe. Below are the provided estimates for these new products:
| **Type of Bookshelf** | **Sales Price per Unit** | **Variable Cost per Unit** |
|-----------------------|--------------------------|-----------------------------|
| Basic | $5.00 | $1.75 |
| Deluxe | $9.00 | $8.10 |
The company is interested in determining the break-even point for these products, assuming Basic and Deluxe are combined into one product line, with a unit contribution margin for the combined product of $2.31. Fixed costs for the upcoming year are estimated at $341,880. The total sales mix percentages must add up to 100%.
### Break-Even Analysis
| **Type of Bookshelf** | **Percent of Sales Mix** | **Break-Even Sales in Units** | **Break-Even Sales in Dollars** |
|-----------------------|--------------------------|-------------------------------|---------------------------------|
| Basic | | | |
| Deluxe | | | |
### Target Profit
Using income statements from both Cover-to-Cover Company and Biblio Files Company, answer the following questions. Both companies have identical sales and net income data, with the only variable being the sales amount.
1. **Required Sales for Cover-to-Cover Company**:
- To increase profit by $30,000, what must be the sales amount?
- **Answer: $____________**
2. **Required Sales for Biblio Files Company**:
- To increase profit by $30,000, what must be the sales amount?
- **Answer: $____________**
3. **Comparison of Answers**:
- What accounts for the difference (if any) between answers to (1) and (2)?
- a. Biblio Files Company has a higher contribution margin ratio, enabling each sales dollar to cover fixed costs and provide operating income.
- b. Cover-to-Cover Company has a lower contribution margin ratio, making it more operationally efficient.
- c. The companies have goals that are not in the relevant range.
- d. Answers are identical; each company requires the same sales amount to achieve the target profit.
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