Question

CVP Analysis of Multiple Products Steinberg Company produce commercial printers. One is the regular model, a basic model that designed to copy and print in black and white. Another model, the deluxe model is a color printerscanner copier. For the coming year, Steinberg expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows: Regular Model Deluxe Model Total $14,400,000 $12,060,000 $26,460,000 less. Varble costs 8,640,000 7,236,000 15,876,000 $5,760,000 $4,824,000 $10,584,000 Contribution margin Less: Direct forced costs 1,200,000 960,000 2,160,000 Segment margin $4,560,000 $3,864,000 58,424,000 Less: Common foxed costs 1,720,800 Operating income $6,703,200 Required: 1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit Regular models 18,750 3,582 x units X units Deluxe models 2. Using information only from the total column of the income statement, compute the sales revenue that must be generated for the company to break even. Round the contribution margin ratio to four decimal places. Use the rounded value in the subsequent computation (Express as a decimal-based amount rather than a whole percentage.) Round the amount of revenue to the nearest dollar Contribution margin ratio 40 Revenue

Answer 1

1.

	Regular Model	Deluxe Model	Total
Contribution margin per unit	64	268
	($5760000/90000)	($4824000/18000)
Sales mix (90:18)	90	18	108
	5760	4824	10584
Weighted average contribution margin per unit ($10584/108)			98

Break-even point in unit = Total Fixed costs/Weighted average contribution margin per unit = ($2160000 + $1720800)/$98 = $3880800/$98 = 39600 units

Regular Model: 39600 x 90/108 = 33000 units

Deluxe Model: 39600 x 18/108 = 6600 units

2. Contribution margin ratio = Contribution margin/Sales = $10584000/$26460000 = 0.4

Breakeven sales = Total fixed costs/Contribution margin ratio = ($2160000 + $1720800)/0.4 = $3880800/0.4 = $9,702,000