Sanchez Co. sells two models of doghouses, the Puppy Palace and the Canine Castle. Sales price per unit Variable cost per unit Contribution unit margin per Puppy Palace RM 50 30 20 Canine Castle RM 75 50 25

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 8E
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2. Sanchez Co. sells two models of doghouses, the Puppy Palace and the
Canine Castle.
Sales price per unit
Variable cost per unit
Contribution margin per
unit
Puppy Palace
RM
50
30
20
Canine Castle
RM
75
50
25
Sanchez has determined that it would break even at an annual sales
volume of 50,000 units, of which 75% would be Puppy Palaces.
Required:
a) What are the contribution margin ratios for each product and the company?
b) What is the amount of Sanchez's estimated annual fixed costs?
c) What is the sales mix?
d) Prepare a product line income statement with operating income of
RM400,000. Fixed production costs will increase RM45,000 and fixed
administrative costs will increase RM22,500 to support the increase in volume.
Transcribed Image Text:2. Sanchez Co. sells two models of doghouses, the Puppy Palace and the Canine Castle. Sales price per unit Variable cost per unit Contribution margin per unit Puppy Palace RM 50 30 20 Canine Castle RM 75 50 25 Sanchez has determined that it would break even at an annual sales volume of 50,000 units, of which 75% would be Puppy Palaces. Required: a) What are the contribution margin ratios for each product and the company? b) What is the amount of Sanchez's estimated annual fixed costs? c) What is the sales mix? d) Prepare a product line income statement with operating income of RM400,000. Fixed production costs will increase RM45,000 and fixed administrative costs will increase RM22,500 to support the increase in volume.
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