Question

Thomas’s Donuts sells three types of donuts: sugar-glazed, cream-filled and giant-sized. The following table shows the sales price and variable cost for each type. Thomas’s incurs $211,680 a year in fixed costs. Assume that the store has a sales mix of three sugar-glazed, two cream-filled, and one giant-sized. Type Sales Price Variable Cost Contribution Margin Sugar-glazed $0.46 $0.30 $0.16 Cream-filled 0.62 0.34 0.28 Giant-sized 0.78 0.38 0.40

How many donuts of each type will be sold at the breakeven point? (Round answers to 0 decimal places, e.g. 25,000.) Sugar-glazed enter a number of donuts Cream-filled enter a number of donuts Giant-sized enter a number of donuts

Answer 1

Answer : Total 882,000 units of donuts will be sold at the breakeven point.

Out of which 441,000 units of sugar-glazed donuts, 294,000 units of cream-filled donuts and 147,000 units of giant-sized donuts will be sold at breakeven point.

Explanation :

Unit Sales Mix Ratio of sugar-glazed, cream-filled and giant-sized donuts = 3:2:1

Contribution Margin per unit of sugar-glazed donuts = $0.16 (Given)

Contribution Margin per unit of cream-filled donuts = $0.28 (Given)

Contribution Margin per unit of giant-sized donuts = $0.40 (Given)

Weighted Average Contribution Margin per unit = Contribution Margin per Unit * Unit Sales Mix Ratio

Weighed Average Contribution Margin per unit = ($0.16 * 3/6) + ($0.28 * 2/6) + ($0.40 * 1/6)

= ($0.48/6) + ($0.56/6) + ($0.40/6)

= $1.44/6

= $0.24

​​​​​Multi-product breakeven point (in units) = Total Fixed Cost / Weighted Average Contribution Margin per unit

Total Fixed Cost = $211,680 (Given)

Therefore, Multi-product breakeven point = $211,680 / $0.24

= 882,000 units

Breakdown of breakeven sales in units :

(Breakeven Point * Unit Sales Mix Ratio)

Breakeven sales units of sugar-glazed donuts = 882,000 * 3/6

= 441,000 units

Breakeven sales units of cream-filled donuts = 882,000 * 2/6

= 294,000 units

Breakeven sales units of giant-sized donuts = 882,000 * 1/6

= 147,000 units