Question

Suppose that Chillmax Company now sells both pairs of shoes and fabric carryalls. The pairs of shoes are priced at $60 and have variable costs of $21 each. The carryalls are priced at $36 and have variable costs of $9 each. Total fixed cost for Chillmax as a whole equals $91,500 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Chillmax expects to sell 3,500 pairs of shoes and 875 carryalls.

Required:

1. Form a package of shoes and carryalls based on the sales mix expected for the coming year.

Answer 1

The package of shoes and carryalls based on the sales mix expected for the coming year is:

= 4:1

Step-by-step explanation:

a) This means for every 4 shoes, there is 1 carryall.

b) Data:

Company-wide Fixed costs = $91,500

Unit price of a pair of shoes = $60

The variable cost = $21

This gives a contribution to the fixed cost = $39 ($60 - $21) per unit

Unit price of carryalls = $36

The variable of carryalls = $9

This gives a contribution to the fixed cost = $27 ($36 - $9) per unit

Estimated quantity of pairs of shoes to be sold next year = 3,500

Estimated quantity of carryalls to be sold next year = 875

The ratio of shoes to carryalls = 3,500:875

= 3,500/875

= 4:1

The sales mix for Chillmax Company refers to the proportion of the company's total sales for each type of product sold (pairs of shoes and carryalls).