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Back Yard Leisure Sells Two Types of Hammocks: Sundance and Shady

Question 175

Essay

Back Yard Leisure sells two types of hammocks: Sundance and Shady Lady.The following table shows the sales price and variable cost for each hammock.Back Yard Leisure incurs $600,000 a year in fixed costs.Assume the store has a sales mix of four Sundance for each Shady Lady hammock sold. Back Yard Leisure sells two types of hammocks: Sundance and Shady Lady.The following table shows the sales price and variable cost for each hammock.Back Yard Leisure incurs $600,000 a year in fixed costs.Assume the store has a sales mix of four Sundance for each Shady Lady hammock sold. Required: a.How many hammocks of each type must be sold for Back Yard Leisure to break even? b.What amount of revenue would be generated by each type of hammock for the company to earn $75,200 in operating income? Required:
a.How many hammocks of each type must be sold for Back Yard Leisure to break even?
b.What amount of revenue would be generated by each type of hammock for the company to earn $75,200 in operating income?

Correct Answer:

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a.$600,000 ÷ [($75 × 4) + $100] = 1,500
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