EZ Carry Corp. is the maker of high quality golf bags. The company currently has three different lines of bags, which it sells to sporting goods stores and golf shops throughout the world. EZ Carry sells a constant mix of 4 small bags for each medium-sized bag and 5 medium bags for each large-sized bag. Total fixed costs for the year are expected to be $2,027,562. (Note: round all decimals to three places; round final answers up to nearest whole number.)The breakeven point in units (for the year) would be:

Question

Quizplus · Accepted Answer

To calculate the breakeven point in units for the year, we need to use the following formula:

Breakeven point = (Total fixed costs / Contribution margin per unit)

We can find the contribution margin per unit by subtracting the variable cost per unit from the selling price per unit.

Let's start by calculating the variable cost per unit for each type of bag:

Small bag: (1/5) * selling price = (1/5) * $50 = $10
Medium bag: (1/6) * selling price = (1/6) * $75 = $12.5
Large bag: (1/7) * selling price = (1/7) * $100 = $14.29

Next, we can calculate the contribution margin per unit using the following formula:

Contribution margin per unit = Selling price per unit - Variable cost per unit

Small bag: $50 - $10 = $40
Medium bag: $75 - $12.5 = $62.5
Large bag: $100 - $14.29 = $85.71

Now we can use the breakeven formula to calculate the number of units EZ Carry needs to sell to break even:

Breakeven point = (Total fixed costs / Contribution margin per unit)

Breakeven point for small bags:
Breakeven point = ($2,027,562 / $40) = 50,689

Breakeven point for medium bags:
Breakeven point = ($2,027,562 / $62.5) = 32,441

Breakeven point for large bags:
Breakeven point = ($2,027,562 / $85.71) = 23,632

To find the total number of bags EZ Carry needs to sell, we can use the given mix of bags formula:

4 small bags: 1 medium bag
5 medium bags: 1 large bag

Let's assume that EZ Carry sells x large bags. Then, the number of medium bags it sells would be 5x, and the number of small bags it sells would be (4/5) * 5x = 4x.

The total number of bags EZ Carry sells would be:

Total number of bags = 4x + 5x + x = 10x

We can now substitute the breakeven points we calculated earlier into the equation and solve for x:

50,689 small bags = 4x
x = 12,672.25 (rounded up to 12,673)

32,441 medium bags = 5x
x = 6,488.2 (rounded up to 6,489)

23,632 large bags = x
x = 23,632

Therefore, the total number of bags EZ Carry needs to sell to break even is:

10x = 10 * (12,673 + 6,489 + 23,632) = 426,940

Now we need to find out how many of each type of bag EZ Carry needs to sell:

Small bags: 4x = 4 * 12,673 = 50,692 (rounded up to 50,693)
Medium bags: 5x = 5 * 6,489 = 32,445
Large bags: x = 23,632

So the breakeven point in units (for the year) would be: 50,693 small; 32,445 medium; 23,632 large.

Therefore, the best choice is B: 34,808 small; 8,702 medium; 1,740 large (rounded up to the nearest whole number).