Question: 19 A company sells two products with the following results for the year just ended.
Product 1 Product 2
Sales $12,000,000 $3,000,000
Variable costs 4,800,000 1,500,000
Fixed costs 5,400,000 400,000
Assuming the product mix and the sales mix remain the same, the company's
breakeven point in sales dollars is
A. $12,100,000
B. $13,810,000
C. $10,000,000
D. $9,800,00
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Govind Jha
Accountant
Ulhasnagar 3 MH
India
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Original Message:
Sent: 10-20-2020 07:50 AM
From: Sanjana M
Subject: CMA part 2 - cvp
Hi Tabya,
For multiple products, the weighted average Selling price would be used.
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Sanjana
Original Message:
Sent: 10-19-2020 06:13 AM
From: Tayba Al-Mehdar
Subject: CMA part 2 - cvp
why did she use Weighted average selling price in her calculation.?
Fact Pattern: Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, unit sales of Product X were 40% of total unit sales. That ratio is not expected to change. |
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Question: 25 | Assume that Catfur Company achieved its planned breakeven level of sales in dollars, but the mix of products sold was one-to-one. All actual costs and unit selling prices equaled budgeted amounts. What is the impact on profitability? |
| | | | Answer (A) is correct. The expected sales mix is 40% for Product X and 60% for Product Y. Weighted-average UCM equals $7 {[$10 – ($10 × 60%)] × 40%} + {[$30 – ($30 × 70%)] × 60%}. Weighted-average selling price equals $22 [($10 × 40%) + ($30 × 60%)]. The weighted-average CMR therefore equals 0.3181818 ($7 ÷ $22), and the breakeven point in sales dollars equals $942,857 ($300,000 ÷ 0.3181818). If actual sales were 50% Product X and 50% Product Y, weighted-average UCM would equal $6.50 {[$10 – ($10 × 60%)] × 50%} + {[$30 – ($30 × 70%)] × 50%}. Weighted-average selling price would equal $20 [($10 × 50%) + ($30 × 50%)]. The weighted-average CMR would therefore equal 0.325 ($6.50 ÷ $20), and the breakeven point in sales dollars would equal $923,077 ($300,000 ÷ 0.325). Given that sales reached the budgeted breakeven point of $942,857, Catfur must have made a profit of $19,780 ($942,857 – $923,077). | | | | | | |
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Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
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