Question

Sales Mix and Break-Even Sales

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:

Products	Unit Selling Price		Unit Variable Cost		Sales Mix
Laptops	$1,600		$800		40%
Tablets	850		350		60%

The estimated fixed costs for the current year are $2,498,600.

Required:

1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year.
units

2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year.

Laptops	units
Tablets	units

3. Assume that the sales mix was 50% laptops and 50% tablets. Compare the break-even point with that in part (1). Why is it so different?
units

The break-even point is lower  in this scenario than in part (1) because the sales mix is weighted more heavily  toward the product with the higher contribution margin per unit  of product.

Answer 1

1.Calculation of Breakeven point of product E
Particulars	Laptop$	Tablet$
Sales	1,600.00	850.00
Less: Variable cost	800.00	350.00
Contribution	800.00	500.00
Sales Mix	40%	60%
Contribution separately	320.00	300.00	620
Total Unit contribution margin	620
Break-even sales = Fixed Costs / Unit Contribution Margin
	=$2,498,600/620
	=4030 units
2.Breakeven sales of both laptop and tablet
Particulars	Laptop	Tablet
Total Breakeven	4030	4030
Sales mix	40%	60%
Units	1612	2418
3.Calculation of Breakeven point of product E(Mix channge 50%:50%)
Particulars	Laptop$	Tablet$
Contribution	800.00	500.00	From part 1
Mix	50%	50%
Contribution	400.00	250.00
Unit Contribution	650
Break-even sales = Fixed Costs / Unit Contribution Margin
	$2,498,600/650
	3,844 unit

The break-even point is lower  in this scenario than in part (1) because the sales mix is weighted more heavily  toward the product with the higher contribution margin per unit  of product.