Wilsons Leather retails two products, a luggage carrier and a
computer carrier. The expected level of sales is 200,000 units.
Information pertaining is presented:
1. The luggage carrier has a selling price of $52 per unit;
variable production costs are $40.
2. The computer carrier has a selling price of $44 per unit;
variable production costs are $30.
3. Variable selling costs are $6 per unit for luggage carriers
and $3 for computer carriers.
4. Fixed production costs total $1,000,000; fixed selling
expense is $250,000.
5. The products are sold in a ratio of four luggage carriers to
one computer carrier.
REQUIRED: SHOW ALL WORK!!!
1. Prepare a Gross Margin Income Statement.
2. Prepare a Contribution Margin Income Statement.
3. Calculate the breakeven point for Wilsons Leather in units
and sales dollars.
4. If Wilsons Leather could change the mix from 4:1 to 3:2 by
increasing advertising by $100,000, should the increased
advertising campaign be undertaken? Why or why not. (Be sure to
show calculations to support your answer.)