Question

Sales mix and break-even sales

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $141,000, and the sales mix is 80% bats and 20% gloves. The unit selling price and the unit variable cost for each product are as follows:

Products	Unit Selling Price		Unit Variable Cost
Bats	$60		$60
Gloves	100		50

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

1. Compute the break-even sales (units) for the overall enterprise product, E.

   units

2. How many units of each product, baseball bats and baseball gloves, would be sold at the break-even point?

   Baseball bats:	units
   Baseball gloves:	units

Answer 1

Solution :

a.	Overall Breakeven Sales (Units)	14,100 Units
b.	Baseball Bats	11,280 Units
	Baseballs Gloves	2,820 Units

Working :

Step 1 : Calculation of Contribution per Unit :

Weighted Contribution per Unit = Contribution per Unit * Respective Sales Mix Ratio

	Bats	Gloves
(a) Sales Price per Unit	$ 60	$ 100
(b) Variable Cost per Unit	$ 60	$ 50
(c) Contribution per Unit (a - b)	$ 0	$ 50
(d) Sales Mix Ratio	80%	20%
(e) Weighted Contribution per Unit (c * d)	$ 10

Step 2 : Overall Breakeven :

Overall Breakeven = Fixed Cost / Weighted Contribution per Unit

= $ 141,000 / $ 10

= 14,100 Units

Step 3 : Units of Each Product :

Units of Bats = Overall Breakeven Units * Sales Mix of Bats

= 14,100 * 80%

= 11,280 Units

Units of Gloves = Overall Breakeven Units * Sales Mix of Gloves

= 14,100 * 20%

= 2,820 Units

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