Question - This is a Multiproduct CVP question:
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Profitability Analysis for the Year Ended December 31,2010
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Audio
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Video
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Car
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Total
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Sales
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$3,200,000
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$1,920,000
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$1,280,000
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$6,400,000
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Less variable costs:
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Cost of merchandise
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$1,900,000
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$1,360,000
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$610,000
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$3,870,000
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Salary, part time staff
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$180,000
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$100,000
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$55,600
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$335,600
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total variable costs
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$2,080,000
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$1,460,000
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$665,600
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$4,205,600
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Contribution margin
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$1,120,000
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$460,000
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$614,400
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$2,194,400
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Contribution margin ratio
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0.3500
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0.2396
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0.4800
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0.3429
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Less direct fixed costs:
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Salary, full time staff
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$325,000
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$240,000
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$220,000
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$785,000
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Total
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$795,000
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$220,000
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$394,400
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$1,409,400
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Less common fixed costs:
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Advertising
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$115,000
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Utilities
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$25,000
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Other administrative costs
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$570,000
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Total common fixed costs
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$710,000
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Profit
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$699,400
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Required -
a. Calculate sales needed to achieve a profit of $1,800,000, assuming the current mix.
b. Determine the sales of audio, video, and car products in the total sales amount calculated for (a. the question above).