Question

CVP Analysis of Multiple Products

Steinberg Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Steinberg expects to sell 80,000 regular models and 16,000 deluxe models. A segmented income statement for the two products is as follows:

Regular Model Deluxe Model Total
Sales $12,800,000   $10,720,000   $23,520,000  
Less: Variable costs 7,680,000   6,432,000   14,112,000  
   Contribution margin $5,120,000   $4,288,000   $9,408,000  
Less: Direct fixed costs 1,200,000   960,000   2,160,000  
   Segment margin $3,920,000   $3,328,000   $7,248,000  
Less: Common fixed costs 1,838,400  
   Operating income $5,409,600  

Required:

1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit.

Regular models units
Deluxe models units

2. Using information only from the total column of the income statement, compute the sales revenue that must be generated for the company to break even. Round the contribution margin ratio to four decimal places. Use the rounded value in the subsequent computation. (Express as a decimal-based amount rather than a whole percentage.) Round the amount of revenue to the nearest dollar.

Contribution margin ratio
Revenue $

Answer 1

Req 1.
Regular Model:
Total Contribution:		5120000
Divide: Units		80000
CM per unit		64
Fixed cost of Regular:		1200000
Divide: CM per unit		64
Break even units		18750
Deluxe Model:
Total Contribution:		4288000
Divide: Units		16000
CM per unit		268
Fixed cost of Regular:		960000
Divide: CM per unit		268
Break even units		3582.08955
Req 2.
Total Contribution		9408000
Divide: Total sales		23520000
CM ratio		40%
Total fixed cost:
Direct FC		2160000
Common FC		1838400
Total fixed cost:		3998400
Divide: CM ratio		40.00%
Break even sales in$		9996000