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 Topic: Query - Beckers2012 - Moduleb2 ( Topic Closed)
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dvyaspoojari
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| Posted: 11 May 2012 at 18:14 | IP Logged
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Passmaster question CPA-05781
Question:- Wren Co. Manufactures and sells two products
with selling prices and variable costs as follows
Product A
Selling Price - $18
Variable Cost - $12
Product B
Selling Price - $22
Variable Cost - $14
Wren's Total Annual Fixed Costs are &38400. Wren sells
Four units of A for every Unit of B. If operational
Income last year was 28800. WHat was the number of units
Wren Sold?
a. 5486
b. 6000
c. 9600
d. 10,500
Answer in Passmaster is 10,500. Passmaster solution is
based on Product A = 4 units of Product B.
My query is - is this right ? or it should be
4 units of Product A = 1 Unit of Product B.
If you think i am wrong please explain me the solution
given in the passmaster.
thank you it will be great help
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musicamor04
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| Posted: 12 May 2012 at 12:57 | IP Logged
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10,500 is correct because for every 1 unit of B sold, 4 units of A are sold. The quantity of "A" is FOUR times the quanity of B.
__________________
BEC - (65, 75, lost credit re-take May 30, 2012)
FAR - (42, 60, 64, 76)
AUD - (63, 87)
REG - (70, 58, 50 69, 70, 88--FINALLY!!)
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maryk
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| Posted: 13 May 2012 at 01:38 | IP Logged
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The wording "Product A = 4 units of product B" really is confusing. The problem says that Product A is sold at a rate of 4 to 1 relative to product B. I don't use Becker, so I can't see if there is typo or error in the explanation, or just bad wording. I would solve the problem this way.
1. Find the weighted contribution margin/unit (for a set of 5 products)
Weighted selling price 18.80
4A (18.00 x 4)/5 = 14.40
1B (22.00 x 1)/5 = 4.40
Weighted VC &nbs p; 12.40
4A (12.00 x 4)/5 = 9.60
1B (14.00 x 1)/5 = 2.80
2. calculate contribution margin per combined unit (set of 5 products)
18.80-12.40 = 6.40/unit
3. Work backwards on the income statement with the information given to find your unknowns (in this case, the contribution margin):
67,200 Calculated Contribution Margin (NI + FC)
(38.400) Give FC
________
28,800 Given Net Income
4. find number of units sold by dividing total CM by CM.unit
67,200 / 6.40 = 10,500 units of product
If they wanted to know how many A's:
(10,500 x 4)/5 = 8,400 A's
(10,500 x 1)/5 = 2,100 B's
(This may have been way more info than you where looking for)
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REG: 86
FAR: 86
AUD: 87
BEC: 75
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dvyaspoojari
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| Posted: 13 May 2012 at 12:51 | IP Logged
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@musicamor - thank you very much for your explanation - it
just went into my head. But i am not sure if i will be able
to think that way during exams. My first guess would be 4A
= B - but then now i will take special care to deal such
problems. Thanks again
@maryK - This is just an appropriate information that you
have given me to get the concept right. Thank you very much
for your explanation! I really appreciate it.
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musicamor04
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| Posted: 13 May 2012 at 17:31 | IP Logged
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Great example, maryk!
__________________
BEC - (65, 75, lost credit re-take May 30, 2012)
FAR - (42, 60, 64, 76)
AUD - (63, 87)
REG - (70, 58, 50 69, 70, 88--FINALLY!!)
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