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PB8.
LO 3.4Tim-Buck-II rents jet skis at a beach resort. There are three models available to rent: Junior, Adult, and Expert. The rental price and variable costs for these three models are as follows:



The current product mix is 5:4:1. The three models share total fixed costs of $114,750

Calculate the sales price per composite unit.
What is the contribution margin per composite unit?
Calculate Tim-Buck-II’s break-even point in both dollars and units.
Using an income statement format, prove that this is the break-even point.

Respuesta :

ahmedgodtrust

Answer:

Products         Selling price   Unit variable cost

                                $                       $

Junior                     50                      15

Adult                       75                      25

Expert                     110                   60

Total                       235                   100

The sales price per composite unit = $235

The contribution margin per composite unit

= Composite selling price - Composite unit variable cost  

= $235 - $100

= $135

Break-even point in units

= Fixed cost

  Contribution per unit

= $114,750

  $135

= 850 units

Break-even point in dollars

= Break-even point in units x Composite selling price

= 850 units x $235

= $199,750

                     Income Statement    

                                                               $

Total contribution ($135 x 850 units)   114,750

Less: Fixed cost                                     114,750

Net profit                                                   0

                                                                                                                                                                             

Explanation:

Sales price per composite unit is the aggregate of all the selling prices.

Contribution margin per composite unit equals composite selling price minus composite unit variable cost.

Break-even point in units is fixed cost divided per composite contribution margin per unit.

Break-even point in dollars equal break-even point in units multiplied by selling price.

Income statement is prepared by deducting the total fixed cost from the total contribution.

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