EuroPottery Gmbh of Munich has two divisions, Earthenware Products Division and Stoneware Products Division. The segmented income statement for the most recent quarter is illustrated below. All currency amounts are in Euros (€).Treat each question independently:Determine the breakeven point for the Earthenware Division.Determine the breakeven point of the Stoneware Division.Next month the Earthenware division is anticipating increases in variable costs of €0.75 per unit and an increase in direct fixed costs of €2,000. If, instead of increasing the volume we increase the price of the product, what price must we set to achieve the target divisional controllable margin of €51,000?Euro Pottery is considering modernizing the Stoneware division. The firm has the opportunity to purchase some automated equipment that is estimated to save €1.50 per unit in variable costs but would result in higher fixed costs. Assuming no change in sales volume, determine the target fixed costs that would not adversely affect divisional controllable margin (i.e. margin remains €72,000).Determine the weighted-average contribution margin per unit based on the current sales mixDetermine the weighted-average contribution margin ratio based on the current sales mixDetermine the breakeven point for the firm as a whole assuming sales mix remains constant. Why do the individual divisional breakeven points NOT reconcile with the breakeven point for the firm as a whole?Assume the company has a target Operating Income after taxes of €50,000. Assuming the original cost structures and sales mix remain constant, how many units of Earthenware and Stoneware would the company need to sell? SalesLess variable expensesContribution marginLess direct fixed costsDivisional controllable marginLess common fixed costsOperating income before taxesIncome taxes (30%)Operating income after taxespricevariable costvolumeCalculated sales mix by REVENUE€€€EuroPottery Profit & Loss, Quarter ending 30/06/2022Total Company€€Earthenware480,000 100.0% € 180.000 € 15.0048.8%4.5054,000126,000 € 10.5051.3% €78,00048,000234,000246,000126,000120,00063,00057,00017,10039,900€37.5%€ 15.00€4.5012,000Stoneware100% € 300,000 € 12.00180,000 7.2030%70% € 120.000 € 4.8048,00072,000€62.5%€ 12.00€ 7.2025,000100%60%40%

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Answered: EuroPottery Gmbh of Munich has two…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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EuroPottery Gmbh of Munich has two divisions, Earthenware Products Division and Stoneware Products Division. The segmented income statement for the most recent quarter is illustrated below. All currency amounts are in Euros (€).

Treat each question independently:

Determine the breakeven point for the Earthenware Division.
Determine the breakeven point of the Stoneware Division.
Next month the Earthenware division is anticipating increases in variable costs of €0.75 per unit and an increase in direct fixed costs of €2,000. If, instead of increasing the volume we increase the price of the product, what price must we set to achieve the target divisional controllable margin of €51,000?
Euro Pottery is considering modernizing the Stoneware division. The firm has the opportunity to purchase some automated equipment that is estimated to save €1.50 per unit in variable costs but would result in higher fixed costs. Assuming no change in sales volume, determine the target fixed costs that would not adversely affect divisional controllable margin (i.e. margin remains €72,000).
Determine the weighted-average contribution margin per unit based on the current sales mix
Determine the weighted-average contribution margin ratio based on the current sales mix
Determine the breakeven point for the firm as a whole assuming sales mix remains constant. Why do the individual divisional breakeven points NOT reconcile with the breakeven point for the firm as a whole?
Assume the company has a target Operating Income after taxes of €50,000. Assuming the original cost structures and sales mix remain constant, how many units of Earthenware and Stoneware would the company need to sell?

Sales
Less variable expenses
Contribution margin
Less direct fixed costs
Divisional controllable margin
Less common fixed costs
Operating income before taxes
Income taxes (30%)
Operating income after taxes
price
variable cost
volume
Calculated sales mix by REVENUE
€
€
€
EuroPottery Profit & Loss, Quarter ending 30/06/2022
Total Company
€
€
Earthenware
480,000 100.0% € 180.000 € 15.00
48.8%
4.50
54,000
126,000 € 10.50
51.3% €
78,000
48,000
234,000
246,000
126,000
120,000
63,000
57,000
17,100
39,900
€
37.5%
€ 15.00
€
4.50
12,000
Stoneware
100% € 300,000 € 12.00
180,000 7.20
30%
70% € 120.000 € 4.80
48,000
72,000
€
62.5%
€ 12.00
€ 7.20
25,000
100%
60%
40%

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