Talk Ltd manufactures a line of smart phones, namely: ichat, idistance and iroaming. The company has...

Transcribed Image Text:

Talk Ltd manufactures a line of smart phones, namely: ichat, idistance and iroaming. The company has experienced considerable variations in sales volumes and variable costs over the last year and the Management Accountant Mr Singapore believes the forecast should be carefully evaluated from a cost volume profit (CVP) perspective. The forecasted figures for 2017 follow: Unit sales Unit selling price Variable selling cost per unit Plastic tubes ichat 50,000 $84 $29 $19 idistance 50,000 $108 $29 $13 iroaming 50,000 $110 $29 $18 In October 2017 the company's CEO informed the Management Accountant that the sales mix of its three products has changed as sales for the "iroaming" have escalated due to a new trend sweeping the nation. The Management Accountant is now required to re analyse its products from a cost volume profit (CVP) perspective. Even with a new sales mix the company's general fixed costs are still expected to remain the same at $5,000,000. Based on the new phase the forecasted sales volume for the "iroaming" is expected to double whilst the sales volume of the other two units will remain the same. The selling price for the "iroaming" is also forecasted to increase by $34.00 per unit, and the selling price of the other two phones will remain the same. Variable selling costs for each product are expected to increase by $1. Additional Direct skilled labour costs are required for all three products, $5.00 per unit for the ichat and the idistance and $10 for the iroaming. Required: a) Calculate the new sales mix for the company in sales units and percentage for each product. b) Using the new sales mix (as calculated in part a above) and forecasted changes calculate the weighted average contribution margin (WACM) for all three products. c) Using the new forecasted figures calculate how many units of each product must be sold for the company to break even. d) How many units in total must be sold to break-even, if the company was to make a profit $100,000 Talk Ltd manufactures a line of smart phones, namely: ichat, idistance and iroaming. The company has experienced considerable variations in sales volumes and variable costs over the last year and the Management Accountant Mr Singapore believes the forecast should be carefully evaluated from a cost volume profit (CVP) perspective. The forecasted figures for 2017 follow: Unit sales Unit selling price Variable selling cost per unit Plastic tubes ichat 50,000 $84 $29 $19 idistance 50,000 $108 $29 $13 iroaming 50,000 $110 $29 $18 In October 2017 the company's CEO informed the Management Accountant that the sales mix of its three products has changed as sales for the "iroaming" have escalated due to a new trend sweeping the nation. The Management Accountant is now required to re analyse its products from a cost volume profit (CVP) perspective. Even with a new sales mix the company's general fixed costs are still expected to remain the same at $5,000,000. Based on the new phase the forecasted sales volume for the "iroaming" is expected to double whilst the sales volume of the other two units will remain the same. The selling price for the "iroaming" is also forecasted to increase by $34.00 per unit, and the selling price of the other two phones will remain the same. Variable selling costs for each product are expected to increase by $1. Additional Direct skilled labour costs are required for all three products, $5.00 per unit for the ichat and the idistance and $10 for the iroaming. Required: a) Calculate the new sales mix for the company in sales units and percentage for each product. b) Using the new sales mix (as calculated in part a above) and forecasted changes calculate the weighted average contribution margin (WACM) for all three products. c) Using the new forecasted figures calculate how many units of each product must be sold for the company to break even. d) How many units in total must be sold to break-even, if the company was to make a profit $100,000

Answer rating: 100% (QA)

a The new sales mix for the company in sales units and percentage for each product is ichat 50000 un... View the full answer