Toledo Tool Company (TTC) manufactures a line of electric garden tools that are s old in general hard-ware stores. The company’s controller, Will Fulton, has just received the sales forecast for the coming year for TTC’s three products: hedge clippers, line trimmers, and leaf blowers. TTC has experienced considerable variations in sales volumes and variable costs over the past two years, and Fulton believes the forecast should be carefully evaluated from a cost- volume- profit viewpoint. The preliminary budget information for 20x4 follows:

For 20x4, TTC’s fixed manufacturing overhead is budgeted at $ 6,000,000, and the company’s fixed selling and administrative expenses are forecasted to be $ 1,800,000. TTC has a tax rate of 40 percent.

Required:
1. Determine TTC Company’s budgeted net income for 20x4.
2. Assuming the sales mix remains as budgeted, determine how many units of each product TTC must sell in order to break even in 20x4.
3. After preparing the original estimates, management determined that its variable manufacturing cost of leaf blowers would increase by 20 percent, and the variable selling cost of line trimmers could be expected to increase by $ 3 per unit. However, management has decided not to change the selling price of either product. In addition, management has learned that its leaf blower has been perceived as the best value on the market, and it can expect to sell three times as many leaf blowers as each of its other products. Under these circumstances, determine how many units of each product TTC would have to sell in order to break even in 20x4.
(CMA,adapted)

Transcribed Image Text:

Hedge Clippers Line Trimmers Leaf Blowers Unit sales... Unit selling prioe Variable manufacturing cost per unit.... Variable selling coet per unit 50,000 $84 39 15 50,000 $108 36 12 100,000 $144 75 18