RELACION COSTO VOLUMEN UTILIDAD – MEZCLA DE MERCADO

1. Basic sales mix. The general manager of Lo-Price Grocery Stores reviewed me following
data. Fixed costs are $680.000 per month.
Produce Meat/Dairy Canned Goods
Contribution margin percentage 40% 35% 30%
Sales mix percentage, in dollars 30% 20% 50%
Required.
o Determine the weighted-average contribution margin percentage
o Determine the break-even sales volume per month.
o Determine the sales necessary to earn $90.000 per month.

2. Improving sales mix .Davis Exterminating Company performs a wide variety of past
control services. George Davis, the owner, has been examining the following forecasts for
200X.
Type of Expected Dollar Contribution
Service Volume for 200X Margin Percentage
Termites $120,000 60%
Lawn pests 90,000 50%
Interior pests 90.000 70%
Total fixed costs are expected to be $140.000 in 200X
Required
1. What is the weighted-average contribution margin percentage?
2. What profit should Davis earn?
3. The actual sales mix turned out to be 20% termites, 30% lawn pests, and 50% interior pests.
Total actual sales were $300.000 and total fixed costs were $140.000. Determine (a) the actual
weighted-average contribution margin percentage and (b) profit.
3. Product line income statements. Campus Laundromat is two years old. Sales have been
$4.000 per week, contribution margin is 75% of sales, and weekly fixed costs have been
$1.800. Jill Owens, its Owner, recently began co sell beer and also installed stereo
equipment. She is now selling 800 bottles per week at $1.00. Variable cost $0.40 per
bottle. Additional fixed costs associated with the beer and stereo equipment are $300 per
week. The laundry business has also increased to $4.800 per week. JiIl’s accountant has
prepared the following income statement.
Beer Laundry Total
Sales $800 $4,800 $5.600
Variable costs 320 1,200 1,520
Contribution margin $480 3.600 $4,080
Fixed costs 380 1.720 2.100
Income $100 $1.880 $1.980
The accountant assigned the $300 fixed costs added by the beer business to beer. He also
allocated $80 in building rent, light, and heat to beer, based on the relative space occupied by
the bar and the laundry equipment.
Required
1. Prepare an income statement for Jill´s business before she sold beer.
2. Prepare a new product-line income statement for Jill’s business after she started selling beer.
Show the $300 fixed costs as direct to beer and the original $1,800 as direct to the laundry
business.
3. Does the income statement you prepared for item 2 better show the results in the two lines?
Why or why not?
4. Basic sales mix. Allen Cosmetics makes two facial creams. Allergy-free and Cleans away.
Data are as follows.
Allergy-free Cleans away
Price per jar $10 $8
Variable cost per jar $5 $2
Monthly fixed costs are $90.000.
Required
1. If the sale mix in dollars is 60% for Allergy-free and 40% for Cleans away. What is the
weighted-average contribution margin percentage? What dollar sales are needed to earn a
profit of $30.000 per month?
2. If the sales mix is 50% for each product in units. What is the weighted-average unit
contribution margin? What unit sale are needed to earn $30.000 per month?
3. Suppose that the company is operating at the level of sales that you calculated in item 1,
earning a $30.000 monthly profit. The sales manager believes that it is possible to persuade
customers to switch to Cleans away from Allergy-free by increasing advertising expenses. He
thinks that $8.000 additional monthly advertising would change the mix to 40% for Allergy-free
and 60% for Cleans away. Total dollar sales will not change, only the mix. What effect would the
campaign have on profit?
5. Weighted-average contribution margin. Blue-Room Products sells three types of
simulated brass soap dishes, the Necessary, the frill and the Luxury. Detailed selling price and
cost data for the products are as follows.
Necessary Frill Luxury
Selling price $10 $20 $25
Variable cost $4 $12 50% of selling price

Fixed cost for these products are $286.000.

Required
1. If the company has a choice of selling one more unit of any one of its products, which product
should it choose?
2. It the company could sell $1.000 more of any one of its products, which product should it
choose?
3. Assume that the sales dollar volume of the company is distributed 40% from Necessary, 20%
from Frill, and 40% from Luxury.
(a) What is the weighted-average contribution margin percentage?
(b) What a the break-even point for the company in sales dollar?
(c) At the break-even point, how many units of Luxury are sold?
4. Assume, instead, that the company’s sales in units are 40% for Necessary. 20% for Frill, and
40% for Luxury.
(a) What is the weighted-average unit contribution margin?
(b) What is the break-even point in units?
(c) At the break-even point, how many units of Luxury are sold?

6. Product profitability and mix. The sales manager of Worthem Company has been looking
at the following extracts from the monthly marketing plan for the coming year. Worthem
distributes scented bat oils.
Paree Enchante Whisper
Selling price $20 $16 $8
Variable cost 6 4 4
Contribution margin 14 12 4
Expected monthly volume in bottles 5.000 12.000 16.000

Required
1. Determine which product is most profitable (a) per unit sold and (b) per dollar sold.
2. The sales manager would like to achieve a better mix and believes that an advertising
campaign could result in buyers of 3.000 bottles of Enchante switching to Paree and buyers of
8000 bottles of Whisper switching to Paree. The campaign would cost $80.000 per month.
Determine whether Worthem should undertake the campaign.
7. Product profitability. Wrynn Company sells three kinds of tobacco jars, The controller has
prepared the following analysis of profitability of each of the jars.

Flavor saver Shag holder Burley keeper

Selling price $5.00 $8.00 $11.00
Variable costs $2.00 $4.00 $ 6.40
Fixed costs $3.00 $3.00 $3.00
Total costs $5.00 $7.00 $ 9.40
Profit $1.00 $ 1.60
Profit percentage lo selling price 0% 12.5% 14.5%
Annual volume 22.000 15.000 13.000

The company has total fixed costs of $150.000 per year. The controller obtained the fixed cost
per unit figure of $3 by dividing $150.000 by 50.000 units (22.000 + 15,000 + 13,000). On the
basis of the analysis, the controller suggests that the Flavorsaver model be discontinued if a
more profitable substitute can be found. This conclusion upsets the sales manager, who has
budgeted a $10.000 promotional campaign for Flavorsaver. He estimates that the $10.000
expenditure on any product would increase is volume by 25%. Sales of the other products
would be unaffected, as would existing fixed costs.
Required
Determine which product should be selected for the special promotion.

8. CVP analysis product mix. Happy Times Brewery produces and sells two grades of beer:
regular and premium. Premium sells for $9.50 per case, regular for $7.20. Variable brewing
costs par case are $4.80 (premium) and $3.75 regular). Sales of regular beer, in cases, are
double those of premium. Fixed brewing costs are $120,000 monthly and fixed selling and
administrative cost are $75.000 monthly. The only variable cost besides variable brewing cost is
a 10% sales commission.
Required.
1. Compute the break-even point in total cases per month.
2. How many cases of each kind of beer are sold at break even?3. The brewery is now selling
about 90.000 cases per month. The advertising manager believes that sales of premium beer
could be increased by 20% if an extensive advertising campaign were undertaken. The
campaign would cost $24.000 per month. However, sales of regular beer are expected to fall by
about 5% because some customers now buying the regular grade would merely switch to
premium. Should the campaign be undertaken?
4. If the campaign were undertaken, what is the weighted - average unit contribution margin.
5. What is the new break-even point in unit sales?
9. Product profitability. immediately upon graduation from State University, Jan Wilks took the
position of assistant controller with Crow Clothing Company. The controller has given her the
following information based on expected operations for the coming year.
T-Shirts Sweatshirts Jeans
Selling price $6 $ 15 $20
Variable cost s 3 6 12
Contribution margin $3 $9 $8
Sales mix percentage. in dollar sales 40% 40% 20%
Total fixed cost are $840.000.

Required.
1. The marketing manager believes that the company could increase sales of any of the three
products by one unit for each $4 in additional advertising expenditures. Which product would it
be most profitable to advertise?
2. Determine me weighted-average contribution margin percentage.
3. Determine the break-even point.
4. The president wants a profit of $210.000. Determine the sales dollars needed to achieve this
goal.
5. After extensive discussions with the sales manager and marketing department, the controller
believes that the sales mix will probably change to 20%, 30%, and 50% for T-shirts. sweatshirts,
and jeans, respectively.
(a) Determine the new break-even point.
(b) Determine the sales needed to earn $210.000
10. Product profitability and pricing .Jackson Confections makes three flavors of jelly:
grape, strawberry, and peach. Price and cost data are as follows.
Grape Strawberry Peach
Selling price per case $10 $12 $14
Variable cost per case 6 9 7
Monthly fixed costs are $250.000

Required.
1. The sales mix, in dollars, is 40%. 40%. and 20% for grape, strawberry, and peach jelly,
respectively. Determine the sales dollars that will yield a monthly profit of $50.000.
2. The president would like to earn $50.000 on sales of $800.000. He proposes to do this by
increasing the price of strawberry jelly. He expects the mix to remain the same after the price of
strawberry jelly increases. What price must Jackson charge for strawberry jelly to achieve the
president’s goal?.

11. Product profitability. Messorman Company produces three models of pen and pencil sets,
regular, silver and gold. Price and cost data are as follows.

Regular Silver Gold

Selling price 10 20 20
Variable costs 6 8 15
Monthly fixed costs are $200.000.

Required.
1. Which model is most profitable per unit sold?
2. Which model is most profitable per dollar of sales?
3. Suppose the sales mix in dollars is 40% Regular, 20% Silver. and 40% Gold.
(a) What is the weighted-average contribution margin?
(b) What is the monthly break-even point?
(c) What sales volume is necessary to earn a profit of $30.000 per month?
4. Suppose the sales mix in dollars is 30% Regular, 30% Silver. and 40% Gold.
(a) What is the break-even point?
(b) What sales volume is necessary to earn $30.000 per month?
5. Suppose the sales mix in dollars is 40% Regular, 20% Silver. and 40% Gold.
(a) What is the weighted-average unit contribution margin?
(b) What is the break-even point in totals units?
(c) How many total units must Messorman sell to earn $30.000 per month?
12. What is profitability? Kimbell Company sells three products. Data are as follows.
Product
A B C
Selling price $30 $50 $100
Variable cost 20 25 60
Contribution Margin $10 $25 $40
Annual unit volume 50.000 10.000 5.000

Required.
1. Rank the products in order of profitability as measured by (a) total annual profit, (b)
profitability par unit sold, and (c) profitability per dollar of sales.
2. Explain what the rankings mean and how Kimbell’s manager might use the information.

13. Product line income statements The president of Mifflan Tool Company has just received
the firm’s income statement for January 200X. He is puzzled because you had told him last
year, when working as a consultant to the firm, that sales of $500.000 should produce a profit of
about $46.500 before income taxes.
Mifflan Tool Company
Income Statement for January 200X
Sales $500.000
Cost of sales 307,500
Gross profit $192.500
Operating expenses:
Rent $40.000
Salaries 70.000
Shipping and delivery 23.000
Other expenses 30.000 163.000
Income before taxes $ 29.500

The company sells three lines of power tools, and your analysis assumed the following sales
mix in dollars: saws, 30%; drills 20%; and sanders 50%. The actual mix in dollars in January
was 40% 30%. 30%. The company does not manufacture its products. Cost of sales and
shipping and delivery are variable costs. Alt others are fixed. Data par unit for each product
follow.

Saws Drills Sanders

Selling price $50 $20 $40
Cast of sales $30 $15 $20
Shipping and delivery 2 1 2
Total variable costs $32 $16 $22
Contribution margin $18 $4 $19

None of the fixed casts is directly associated with any particular product line. All costs were
incurred as expected, per unit for variable costs, in total for fixed costs. Selling prices were as
expected.

Required
1. Prepare a new income statement by product, based on actual results in January. Show both
gross profit and contribution margin for each product.
2. Prepare en income statement by product for January, assuming that the expected sales mix
had been achieved.
3. Explain the reasons for the differences between the two statements.