Problem 3-25A (Algo) Determining the break-even point and margin of safety for a company with multiple products LO 3-6 Rooney Company produces two products. Budgeted annual income statements for the two products are provided as follows. Power Lite Total Budgeted Per Budgeted Budgeted Per Budgeted Budgeted Budgeted Number Unit @ $ 700 = $168,000 e 380 =(91,200) @ 320 = Unit @ $ 570 = $ 319,200 e 300 = (168,000) @ 270 = Number Amount $ 487,200 (259,200) 228,000 (114,000) Amount Number Amount Sales 240 560 800 Variable cost 240 560 800 Contribution margin 240 76,800 (19,000) $ 57,800 151,200 (95,000) 560 800 Fixed cost Net income $ 56,200 $ 114,000 Required: a. Based on budgeted sales, determine the relative sales mix between the two products. b. Determine the weighted-average contribution margin per unit. c. Calculate the break-even point in total number of units. d. Determine the number of units of each product Rooney must sell to break even. e. Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined products. f. Determine the margin of safety based on the combined sales of the two products. Complete this question by entering your answers in the tabs below.
Problem 3-25A (Algo) Determining the break-even point and margin of safety for a company with multiple products LO 3-6 Rooney Company produces two products. Budgeted annual income statements for the two products are provided as follows. Power Lite Total Budgeted Per Budgeted Budgeted Per Budgeted Budgeted Budgeted Number Unit @ $ 700 = $168,000 e 380 =(91,200) @ 320 = Unit @ $ 570 = $ 319,200 e 300 = (168,000) @ 270 = Number Amount $ 487,200 (259,200) 228,000 (114,000) Amount Number Amount Sales 240 560 800 Variable cost 240 560 800 Contribution margin 240 76,800 (19,000) $ 57,800 151,200 (95,000) 560 800 Fixed cost Net income $ 56,200 $ 114,000 Required: a. Based on budgeted sales, determine the relative sales mix between the two products. b. Determine the weighted-average contribution margin per unit. c. Calculate the break-even point in total number of units. d. Determine the number of units of each product Rooney must sell to break even. e. Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined products. f. Determine the margin of safety based on the combined sales of the two products. Complete this question by entering your answers in the tabs below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
Question
Transcribed Image Text:Problem 3-25A (Algo) Determining the break-even point and margin of safety for a company with
multiple products LO 3-6
Rooney Company produces two products. Budgeted annual income statements for the two products are provided as follows.
Power
Lite
Total
Budgeted
Per
Budgeted Budgeted
Per
Budgeted
Budgeted Budgeted
Number
Unit
Amount
Number
Unit
Amount
Number
Amount
@ $ 570 = $ 319,200
(168,000)
151,200
(95,000)
$ 487,200
(259,200)
228,000
(114,000)
$ 114,000
@ $ 700 =
$168,000
(91,200)
Sales
240
560
800
Variable cost
240
380 =
560
300
800
=
Contribution margin
240
320 =
@ 270 =
76,800
(19,000)
$ 57,800
560
800
Fixed cost
Net income
$
56,200
Required:
a. Based on budgeted sales, determine the relative sales mix between the two products.
b. Determine the weighted-average contribution margin per unit.
c. Calculate the break-even point in total number of units.
d. Determine the number of units of each product Rooney must sell to break even.
e. Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined
products.
f. Determine the margin of safety based on the combined sales of the two products.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
Required D
Required E
Required F
Based on budgeted sales, determine the relative sales mix between the two products.
Relative percentage for Power
%
Relative percentage for Lite
%
< Required A
Required B
>
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