Beau Company sells Products Ducks and Geese. Last year, Beau sold 60,000 units of Ducks and 74,000 units of Geese. Related data are as follows: Product Unit Selling Price Unit Variable Cost Unit Contribution Margin Ducks $65 $42 $23 Geese $86 $65 $21 Determine the following: a. Beau Co.’s sales mix b. Beau Co.’s unit selling price of E. c. Beau Co.’s unit contribution margin of E d. Beau Co.’s break-even sales in units of E assuming that last year’s fixed costs were $42,000 e. What is the purpose and use of a sales mix? How is a sales mix used to make managerial decisions? What changes could be made for a better outcome? How could you increase profitability?
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Beau Company sells Products Ducks and Geese. Last year, Beau sold 60,000 units of Ducks and 74,000 units of Geese. Related data are as follows:
|
Product |
Unit Selling Price |
Unit Variable Cost |
Unit Contribution Margin |
|
Ducks |
$65 |
$42 |
$23 |
|
Geese |
$86 |
$65 |
$21 |
Determine the following:
a. Beau Co.’s sales mix
b. Beau Co.’s unit selling price of E.
c. Beau Co.’s unit contribution margin of E
d. Beau Co.’s break-even sales in units of E assuming that last year’s fixed costs were $42,000
e. What is the purpose and use of a sales mix? How is a sales mix used to make managerial decisions? What changes could be made for a better outcome? How could you increase profitability?
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