MetalCraft produces three inexpensive socket wrench sets that are popular with do-it-yourselfers. Budgeted information for the upcoming year is as follows.
Total fixed costs for the socket wrench product line is $961,000. If the company's actual experience remains consistent with the estimated sales volume percentage distribution, and the firm desires to generate total operating income of $161,200, how many Model No. 153 socket sets will MetalCraft have to sell?
A) 26,000
B) 54,300
C) 155,000
D) 181,000

Question

MetalCraft produces three inexpensive socket wrench sets that are popular with do-it-yourselfers. Budgeted information for the upcoming year is as follows.
 Total fixed costs for the socket wrench product line is $961,000. If the company's actual experience remains consistent with the estimated sales volume percentage distribution, and the firm desires to generate total operating income of $161,200, how many Model No. 153 socket sets will MetalCraft have to sell?
A) 26,000 
B) 54,300 
C) 155,000 
D) 181,000

Quizplus · Accepted Answer

MetalCraft would need to sell 54,300 Model No. 153 socket sets in order to generate $161,200 in operating income based on the following calculation.
Sales mix: Model 109: 20%; Model 145: 50%; Model 153: 30%
Breakeven: (.2 x $10 - $5.50)A + (.5 x $15 - $8)A + (.3 x $20 - $14)A = $161,200
$.90A + $3.50A + $1.80A = $1,122,200
$6.20A = $1,122,200
A = 181,000 sets
Model 153 breakeven: 181,000 sets x 30% = 54,300 sets

MetalCraft Produces Three Inexpensive Socket Wrench Sets That Are Popular