The Schmidt Company retails two products: a standard and a deluxe version of a luggage carrier. The budgeted income statement for next period is as follows: Standard carrier Deluxe Carrier Total Units sold 120,000 80,000 200,000 revenues at $25 and $40 per unit 3,000,000 3,200,000 6,200,000 Variable cost at $15 and $25 per unit 1,800,000 2,000,000 3,800,000 Contribution margin at $10 and $15 per unit 1,200,000 1,200,00 2,400,000 Fixed cost 1,275,000 operating income 1,125,000 1) Compute the breakeven point in units, assuming that the company achieves its planned sales mix. 2) Compute the breakeven point in units (a) if only standard carriers are sold and (b) if only deluxe carriers are sold. 3)Suppose 200,000 units are sold but only 25,000 of them are deluxe. Compute the operating income. Compute the breakeven point in units. Compare your answer with the answer to requirement 1. What is the major lesson of this problem?
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.
The Schmidt Company retails two products: a standard and a deluxe version of a luggage carrier. The
| Standard carrier | Deluxe Carrier | Total | |
| Units sold | 120,000 | 80,000 | 200,000 |
| revenues at $25 and $40 per unit | 3,000,000 | 3,200,000 | 6,200,000 |
| Variable cost at $15 and $25 per unit | 1,800,000 | 2,000,000 | 3,800,000 |
| Contribution margin at $10 and $15 per unit | 1,200,000 | 1,200,00 | 2,400,000 |
| Fixed cost | 1,275,000 | ||
| operating income | 1,125,000 |
Since you have posted a question with multiple sub parts, we are solving the 1st 3 subparts of the question only. To get the remaining
Break Even Point is the case at which there will be NO PROFIT and NO LOSS. This is the point that every Company required to achieve during their operations.
Formula for Break Even Point = Total Fixed Cost / Contribution margin per unit
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