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Hobby Shop Incorporated produces three different models with the following annual data (this is the...

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Accounting

Hobby Shop Incorporated produces three different models with the following annual data (this is the base case) Plane Car Boat Total Selling price per unit 20 14 24 Variable cost per unit 5 7 8 Expected unit sales 30,000 50,000 20,000 100,000 Sales mix % 30% 50% 20% 100% Fixed costs 650,000 Assume the sales mix remains the same at all levels of sales.

d Using the base case information, prepare a contribution margin income statement for the year

Amount $

Contribution (Selling price - variable cost) units sold

=[(20-5) 30000 + (14-7) 50000 + (24-8) 20000 ]

$1,120,000

Less: Fixed Cost

($650,000)

Net Operating Income

$470,000

h Go back to the base case contribution margin income statement prepared in requirement d. What would the operating profit be if the Plane sales price (1) increases 10 percent, or (2) decreases 10 percent? (Assume total sales remains at 100,000 units.)

i Go back to the base case contribution margin income statement prepared in requirement d. If the sales mix shifts more toward the Car product than to the other two products, would the break-even point in units increase or decrease? Explain and provide calculations.

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