Florida Favorites Company produces toy alligators and plaything mahimahis. Fixed costs are \$ 1. 290. 000 per twelvemonth. Gross saless gross and variable costs per unit are as follow:
Alligators Dolphinfishs
Gross saless Price \$ 20 \$ 25 Variable Costss 8 10

Questions:

A. Suppose the company presently sells 140. 000 alligators per twelvemonth and 60. 000 mahimahis per twelvemonth. Assuming the gross revenues mix corsets constant how many alligators and Dolphins must the company sell to interrupt even?

B. Suppose the company presently sells 60. 000 alligators per twelvemonth and 140. 000 mahimahis per twelvemonth. Assuming the gross revenues mix corsets constant. how many alligators and mahimahis must the company sell to interrupt even per twelvemonth?

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C. Explain why the entire figure of playthings needed to interrupt even in ( a ) is the same as or different from the figure in ( B ) .

Solution: A

|Units |140000 |60000 | 200000 | |Sales monetary value per unit | \$ 20 | \$ 25 | | |Variable Cost per unit | \$ 8 | \$ 10 | | | |Alligators |Dolphins |TOTAL | |Sales ( A ) | \$ 2. 800. 000 | \$ 1. 500. 000 | \$ 4. 300. 000 | |Variable cost ( B ) | \$ 1. 120. 000 | \$ 600. 000 | \$ 1. 720. 000 | | | | |
| |Contribution Margin ( A-B ) | \$ 1. 680. 000 | \$ 900. 000 | \$ 2. 580. 000 | |Less: Fixed cost | | | \$ 1. 290. 000 | |Net income | | | \$ 1. 290. 000 |

Leaden Average Contribution border: Entire Contribution / Total units = \$ 2580000/200000 = \$ 12. 90 Breakeven Point = Fixed Cost / Weighted Average Contribution = \$ 1. 290. 000 / \$ 12. 90

= 100000 units
Allocating TOTAL UNITS to each merchandise based on EXPECTED UNITS PROPORTION= 14:6 Alligators to be produced for Breakeven =100000*14/20
= 70000 units Dolphins to be produced for Breakeven =100000*6/20
= 30000 units

So. Florida Favorites Company has to bring forth 70000 plaything alligators and 30000 plaything mahimahis for breakeven.

B.
|Units |60000 |140000 | 200000 | |Sales monetary value per unit | \$ 20 | \$ 25 | | |Variable Cost per unit | \$ 8 | \$ 10 | | | |Alligators |Dolphins |TOTAL | |Sales ( A ) | \$ 1. 200. 000 | \$ 3. 500. 000 | \$ 4. 700. 000 | |Variable cost ( B ) | \$ 480. 000 | \$ 1. 400. 000 | \$ 1. 880. 000 | |Contribution Margin ( A-B ) | \$ 720. 000 | \$ 2. 100. 000 | \$ 2. 820. 000 | |Less: Fixed cost | | | \$ 1. 290. 000 | |Net income | | | \$ 1. 530. 000 |

Leaden Average Contribution border: Entire Contribution / Total units = \$ 2820000/200000 = \$ 14. 10 Breakeven Point = Fixed Cost / Weighted Average Contribution = \$ 1. 290. 000 / \$ 14. 10

= 91489 units
Allocating TOTAL UNITS to each merchandise based on EXPECTED UNITS PROPORTION
= 6:14 Alligators to be produced for Breakeven
=91489*6/20
= 27446 units Dolphins to be produced for Breakeven
=91489*14/20
= 64042 units

So. Florida Favorites Company has to bring forth 27446 plaything alligators and 64042 plaything mahimahis for breakeven.

C. The entire figure of playthings needed to interrupt even in ( a ) is different from the figure in ( B ) and lower besides. This is due to the ground as leaden part per unit has increased ; fixed cost spreads over greater figure of dollars allowing the breakeven to be achieved early. Possibly ( B ) gross revenues mix is more efficient and gives the house a intimation to bring forth plaything dolphins more as part per unit of a plaything mahimahi is besides higher.

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