Question

Sales Mix and Break-Even Sales New Wave Technology Inc. manufactures and sells two products, MP3 players and satellite radios. The fixed costs are $216,000, and the sales mix is 80% MP3 players and 20% satellite radios. The unit selling price and the unit variable cost for each product are as follows: Products Unit Selling Price Unit Variable Cost MP3 players $50 $40 Satellite radios 130 80

a. Compute the break-even sales (units) for both products combined.

b. How many units of each product, MP3 players and satellite radios, would be sold at the break-even point? MP3 players units Satellite radios units

Answer 1

• All working forms part of the answer
• Working: Foe calculating Weighted Average Unit Contribution margin

Working		MP3 players	Satellite radios
A	Unit Sale Price	$                   50.00	$              130.00
B	Unit variable Cost	$                   40.00	$                 80.00
C= A-B	Contribution margin per unit	$                   10.00	$                 50.00
D	Sales Mix	80%	20%
E = C x D	Weighted Average Contribution margin per unit	$                     8.00	$                 10.00

• Requirement ‘a’

A	Total Fixed Cost	$        216,000.00
B = $ 8 + $ 10	Total Weighted Average Contribution margin per unit	$                   18.00
C = A/B	Break Even sales in Units for both product combined	12,000 units = ANSWER

• Requirement ‘b’

A	Break Even sales in Units for both product combined	12,000
B = A x 80%	Mp3 Players Units	9,600 units = ANSWER
C = A x 20%	Satellite Radio Units	2,400 units = ANSWER