CMA Study Group

is there any other way to solve this question??


Fact Pattern:  MultiFrame Company has the following revenue and cost budgets for the two products it sells:

	Plastic	Glass
	Frames	Frames
Sales price	$10.00	$15.00
Direct materials	(2.00)	(3.00)
Direct labor	(3.00)	(5.00)
Fixed overhead	(3.00)	(4.00)
Net income per unit	$  2.00	$  3.00
Budgeted unit sales	100,000	300,000

The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, MultiFrame rounds to the nearest cent and unit. Question: 20The total number of units needed to break even if sales were budgeted at 150,000 units of plastic frames and 300,000 units of glass frames with all other costs remaining constant is

A.	171,958 units.
B.	418,455 units.
C.	153,947 units.
	Answer (C) is correct. The unit contribution margins for plastic frames and glass frames are $5 ($10 – $2 – $3) and $7 ($15 – $3 – $5), respectively. If the number of plastic frames sold is 50% of the number of glass frames sold, a composite unit will contain one plastic frame and two glass frames. Thus, the composite unit contribution margin will be $19 ($5 + $7 + $7), and the breakeven point in units will be 153,947 [3 units × ($975,000 ÷ $19)].
D.	365,168 units.

------------------------------
Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
------------------------------

Hi,


Contribution Margin for Plastic Frames is 5 and Glass Frames 7.

A composite unit will contain one plastic frame and two glass frame

5X1/3 = 1.66 Plastic Frames
7X2/3 = 4.66 Glass Frames
Total = 6.32 CM per basket
=975000/6.32  = 154,272 Units

------------------------------
Badar Ghafoor
Accountant
Dubai
United Arab Emirates
------------------------------

Original Message:
Sent: 01-11-2021 07:04 AM
From: Tayba Al-Mehdar
Subject: CVP Analysis


is there any other way to solve this question??


Fact Pattern:  MultiFrame Company has the following revenue and cost budgets for the two products it sells:

	Plastic	Glass
	Frames	Frames
Sales price	$10.00	$15.00
Direct materials	(2.00)	(3.00)
Direct labor	(3.00)	(5.00)
Fixed overhead	(3.00)	(4.00)
Net income per unit	$  2.00	$  3.00
Budgeted unit sales	100,000	300,000

The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, MultiFrame rounds to the nearest cent and unit. Question: 20The total number of units needed to break even if sales were budgeted at 150,000 units of plastic frames and 300,000 units of glass frames with all other costs remaining constant is

A.	171,958 units.
B.	418,455 units.
C.	153,947 units.
	Answer (C) is correct. The unit contribution margins for plastic frames and glass frames are $5 ($10 – $2 – $3) and $7 ($15 – $3 – $5), respectively. If the number of plastic frames sold is 50% of the number of glass frames sold, a composite unit will contain one plastic frame and two glass frames. Thus, the composite unit contribution margin will be $19 ($5 + $7 + $7), and the breakeven point in units will be 153,947 [3 units × ($975,000 ÷ $19)].
D.	365,168 units.

------------------------------
Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
------------------------------

Hello Badar,

If you use this approach, you should not round the CM per basket.

CM per basket = (5X1/3 for Plastic Frames) + (7X2/3 for Glass Frames) = 19/3
Breakeven point in units = 975,000 ÷ (19/3) = 153,947

------------------------------
Felix Lawson
Finance Officer
Kenya
------------------------------

Original Message:
Sent: 01-12-2021 03:00 AM
From: Badar Ghafoor
Subject: CVP Analysis

Hi,


Contribution Margin for Plastic Frames is 5 and Glass Frames 7.

A composite unit will contain one plastic frame and two glass frame

5X1/3 = 1.66 Plastic Frames
7X2/3 = 4.66 Glass Frames
Total = 6.32 CM per basket
=975000/6.32  = 154,272 Units

------------------------------
Badar Ghafoor
Accountant
Dubai
United Arab Emirates

Original Message:
Sent: 01-11-2021 07:04 AM
From: Tayba Al-Mehdar
Subject: CVP Analysis


is there any other way to solve this question??


Fact Pattern:  MultiFrame Company has the following revenue and cost budgets for the two products it sells:

	Plastic	Glass
	Frames	Frames
Sales price	$10.00	$15.00
Direct materials	(2.00)	(3.00)
Direct labor	(3.00)	(5.00)
Fixed overhead	(3.00)	(4.00)
Net income per unit	$  2.00	$  3.00
Budgeted unit sales	100,000	300,000

The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, MultiFrame rounds to the nearest cent and unit. Question: 20The total number of units needed to break even if sales were budgeted at 150,000 units of plastic frames and 300,000 units of glass frames with all other costs remaining constant is

A.	171,958 units.
B.	418,455 units.
C.	153,947 units.
	Answer (C) is correct. The unit contribution margins for plastic frames and glass frames are $5 ($10 – $2 – $3) and $7 ($15 – $3 – $5), respectively. If the number of plastic frames sold is 50% of the number of glass frames sold, a composite unit will contain one plastic frame and two glass frames. Thus, the composite unit contribution margin will be $19 ($5 + $7 + $7), and the breakeven point in units will be 153,947 [3 units × ($975,000 ÷ $19)].
D.	365,168 units.

------------------------------
Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
------------------------------

Hi,

You may refer to the CVP Analysis - Multi-product calculation.

Multi-product breakeven point = Total Fixed Cost / Weight-average Unit Contribution Margin

Weight-average UCM = $5 x (150,000 units/ 450,000 units) + $7 x ( 300,000 units/ 450,000 units) = $6.33333

Multi-product breakeven point = $975,000 / 6.33333= 153,947 units

Hope that helps

Thanks,


------------------------------
An Le
Director/Manager
Ho Chi Minh
Viet Nam
------------------------------

Original Message:
Sent: 01-11-2021 07:04 AM
From: Tayba Al-Mehdar
Subject: CVP Analysis


is there any other way to solve this question??


Fact Pattern:  MultiFrame Company has the following revenue and cost budgets for the two products it sells:

	Plastic	Glass
	Frames	Frames
Sales price	$10.00	$15.00
Direct materials	(2.00)	(3.00)
Direct labor	(3.00)	(5.00)
Fixed overhead	(3.00)	(4.00)
Net income per unit	$  2.00	$  3.00
Budgeted unit sales	100,000	300,000

The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, MultiFrame rounds to the nearest cent and unit. Question: 20The total number of units needed to break even if sales were budgeted at 150,000 units of plastic frames and 300,000 units of glass frames with all other costs remaining constant is

A.	171,958 units.
B.	418,455 units.
C.	153,947 units.
	Answer (C) is correct. The unit contribution margins for plastic frames and glass frames are $5 ($10 – $2 – $3) and $7 ($15 – $3 – $5), respectively. If the number of plastic frames sold is 50% of the number of glass frames sold, a composite unit will contain one plastic frame and two glass frames. Thus, the composite unit contribution margin will be $19 ($5 + $7 + $7), and the breakeven point in units will be 153,947 [3 units × ($975,000 ÷ $19)].
D.	365,168 units.

------------------------------
Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
------------------------------