How does shifting the sales mix at Ford Motor Company to more F-150 trucks affect Ford’s break even sales volume?

Ford Motor Company (FORD) sales jumped 31.5 % during June 2022 in the United States as compared to the prior month. Sales of Ford’s F-series trucks and the Explorer, Expedition, and Navigator SUV models drove the sales growth. According to a Bloomberg article (link) earlier this year, the F-150 Series product line is Ford’s most profitable product line.

Ford has three categories of vehicles, Trucks, SUVs, and Cars. According to Ford’s 2021 Form 10-K, below are the combined US unit sales of its vehicles in 2021 (both retail and wholesale). In addition, hypothetical average sales prices and average variable cost per unit are given.

Excel table image. See sentence immediately following this image to download table in Excel.

To download the above table in Excel format for accessibility, click on this link.

View a quick tutorial video about the sales mix at multiproduct firms at this link and then answer the following questions.

Note to instructors: This post is assignable in Pearson’s MyLab and has questions that are auto-graded. All blog questions are found in Instructor Tools > Assignment Manager > Create Assignment > Create homework > And then change the chapter to “News. Accounting in the Headlines.” The “News. Accounting in the Headlines” chapter will be near the bottom of the list of chapters.

Questions

  1. Assume that Ford’s sales revenue is the same as last year’s sales revenue, yet its profits increase. How might this be possible?
  2. Assume that consumer demand for cars is continually to decrease significantly. What strategy might Ford use to deal with this trend so that its net income does not also decrease?
  3. According to the unit sales and hypothetical sales and cost data given in the article, what would Ford’s weighted-average contribution margin be?

Copyright 2022 Wendy M. Tietz, LLC


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About Dr. Wendy Tietz, CPA, CMA, CSCA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Education.

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