Question

i-Ch 1,2,3 Saved Help Sundial, Inc., produces two models of sunglasses--AU and NZ. The sunglasses have the following characteristics. Selling price per unit Variable cost per unit Expected units sold per year AU $ 500 $ 200 40,000 NZ $ 500 $ 250 60,000 The total fixed costs per year for the company are $7,830,000. Required: a. What is the anticipated level of profits for the expected sales volumes? b. Assuming that the product mix is the same at the break-even point, compute the break-even point. c. If the product sales mix were to change to four pairs of AU sunglasses for each pair of NZ sunglasses, who break-even volume for Sundial, Inc.? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the anticipated level of profits for the expected sales volumes? oticipated profit K Required A Required B >

Answer 1

Required 1:

	AU	NZ	Total
Selling price per unit	$500	$500	-
(-) Variable cost per unit	($200)	($250)	-
Contribution margin per unit	$300	$250	-
Expected units sold	40,000	60,000	-
Contribution per product	$12,000,000	$15,000,000	$27,000,000
(-) Fixed cost	-	-	($7,830,000)
Expected profit	-	-	$19,170,000

Anticipated profit = $19,170,000.

Required 2:

Break-even point = Fixed cost / Contribution per product mix

= $7,830,000 / $270

= 29,000 Units.

Contribution per product mix = ($300*4 + $250*6) / (4+6) = 2700 / 10 = $270

• Units of AU = 29,000 * 4/10 = 11,600 units
• Units of NZ = 29,000 * 6/10 = 17,400 units

Required 3:

Break-even point = Fixed cost / Contribution per product mix

= $7,830,000 / 290

= 27,000 units

Contribution per product mix = ($300*4 + $250*1) / (4+1) = 1,450 / 5 = $290

• Units of AU = 27,000 * 4/5 = 21,600 units
• Units of NZ = 27,000 * 1/5 = 5,400 units