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Managerial Accounting Solution

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12 views2 pages

Managerial Accounting Solution

Uploaded by

emfatima25
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Question 1: Breakeven Point in Units

To calculate the breakeven point in units for each product type and in total, we use the formula:

Breakeven Point (in units) = Fixed Costs / Contribution Margin per unit

For Speakers:

 Selling Price per Speaker = $500


 Variable Cost per Speaker = $200
 Contribution Margin per Speaker = Selling Price per Speaker - Variable Cost per
Speaker
 Contribution Margin per Speaker = $500 - $200 = $300 per unit
 Breakeven Point for Speakers = $200,000 (Fixed Costs) / $300 (Contribution Margin
per Speaker) = 666.67 units

For Amplifiers:

 Selling Price per Amplifier = $1,000


 Variable Cost per Amplifier = $400
 Contribution Margin per Amplifier = Selling Price per Amplifier - Variable Cost per
Amplifier
 Contribution Margin per Amplifier = $1,000 - $400 = $600 per unit
 Breakeven Point for Amplifiers = $200,000 (Fixed Costs) / $600 (Contribution
Margin per Amplifier) = 333.33 units

Total Breakeven Point (in units) = 666.67 (Speakers) + 333.33 (Amplifiers) = 1000 units
Question 2: Breakeven Point in Dollars

To calculate the breakeven point in dollars, we can use the following formula:

Weighted Average Selling Price = (Selling Price per Speaker * Sales Mix for Speakers) + (Selling Price
per Amplifier * Sales Mix for Amplifiers)

Weighted Average Selling Price = ($500 * 60%) + ($1,000 * 40%) = $300 + $400 = $700

Breakeven Point (in dollars) = 1000 units * $700 = $700,000

Question 3: Sensitivity Analysis

a. For a 10% increase in the selling price of Speakers, the new selling price becomes $550 ($500 +
10% of $500)..

New Breakeven Point for Speakers = $200,000 (Fixed Costs) / $350 (Contribution Margin per Speaker)
= 571.42 units

b. For a 15% decrease in the selling price of Amplifiers, the new selling price becomes $850 ($1,000 -
15% of $1,000).

New Breakeven Point for Amplifiers = $200,000 (Fixed Costs) / $450 (Contribution Margin per
Amplifier) = 444.44 units
Question 4: Margin of Safety

To calculate the Margin of Safety, we use the following formula:

Margin of Safety (in dollars) = Actual Sales - Breakeven Sales

Given:

Actual sales of 2,500 units of Speakers and 1,000 units of Amplifiers.

Breakeven sales of $700,000.

Margin of Safety (in dollars) = (2,500 * $500 + 1,000 * $1,000) - $700,000 = $1,250,000 - $700,000 =
$550,000

Question 5: Degree of Operating Leverage (DOL)

DOL is calculated as follows:

DOL = Contribution Margin / Operating Income

Given:

Expected Sales = $750,000

Contribution Margin = $300,000

Operating Income = Expected Sales - Variable Costs - Fixed Costs

Operating Income = $750,000 - [(2,500 * $200 + 1,000 * $400)] - $200,000 = $750,000 - ($500,000 +
$400,000) - $200,000 = $750,000 - $900,000 - $200,000 = -$350,000

DOL = $300,000 (Contribution Margin) / -$350,000 (Operating Income) = -0.857

The Degree of Operating Leverage for XYZ Manufacturing is -0.857.

Please note that a negative DOL suggests that the company's operating income is highly sensitive to
changes in sales and that it's operating at a loss in this scenario.

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