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QUESTION:
ZippyZippy
Quadcopters plans to sell a standard
quadcopterquadcopter
(toy drone) for
$ 50$50
and a deluxe
quadcopterquadcopter
for
$ 80$80.
ZippyZippy
purchases the standard
quadcopterquadcopter
for
$ 40$40
and the deluxe
quadcopterquadcopter
for
$ 55$55.
Management expects to sell two deluxe
quadcoptersquadcopters
for every three standard
quadcoptersquadcopters.
The company's monthly fixed expenses are
$ 17 comma 600$17,600.
How many of each type of
quadcopterquadcopter
must
ZippyZippy
sell monthly to breakeven? To earn
$ 8 comma 000$8,000?
Question content area bottom
Part 1
First identify the formula to compute the sales in units at various levels of operating income using the contribution margin approach. (Abbreviations used: Avg. = average, and CM = contribution margin.)
(
+
) ÷
=
Brea
ANSWER:
First identify the formula to compute the sales in units at various levels of operating income using the contribution margin approach. (Abbreviations used: Avg. = average, and CM = contribution margin.)
(
Fixed expenses
+
Operating income
) ÷
Weighed-avg. CM per unit
=
Breakeven sales in units
Part 2
Next compute the weighted-average contribution margin per unit. First identify the formula labels, then complete the calculations step by step.
Standard
Deluxe
Total
Sale price per unit
$50
$80
Deduct:
Variable expense per unit
(40)
(55)
Contribution margin per unit
$10
$25
Sales mix in units
3
2
5
Contribution margin
$30
$50
$80
Weighted average contribution margin per unit
$16
Part 3
How many of each type of
quadcopterquadcopter
must
ZippyZippy
sell monthly to breakeven?
Zippy must sell
660
standard quadcopters and
440
deluxe quadcopters to breakeven.
Part 4
How many of each type of
quadcopterquadcopter
must
ZippyZippy
sell monthly to earn
$ 8 comma 000$8,000?
To reach the target operating income, Zippy must sell
