Question
In: Accounting
Edgewater Enterprises manufactures two products. Information follows: Product A Product B Sales price $ 19.50 $...
Edgewater Enterprises manufactures two products. Information
follows:
| Product A | Product B | |||||
| Sales price | $ | 19.50 | $ | 22.75 | ||
| Variable cost per unit | $ | 6.95 | $ | 7.65 | ||
| Product mix | 40.00% | 60.00% | ||||
Suppose that each product’s sales price increases by 10.00 percent.
Sales mix remains the same and total fixed costs are
$310,000.00.
Calculate the new break-even point for Edgewater. (Round
your intermediate calculations to 2 decimal places and final answer
to the nearest whole number.)
Solutions
Expert Solution
|
Working |
Project A |
Project B |
TOTAL |
|
|
A |
Price (earlier price x 110%) |
$ 21.45 |
$ 25.03 |
|
|
B |
Variable Cost per unit |
$ 6.95 |
$ 7.65 |
|
|
C = A - B |
Contribution Margin per unit |
$ 14.50 |
$ 17.38 |
|
|
D |
Product Mix |
40.00% |
60.00% |
100.00% |
|
E = C x D |
Weighted Average Contribution Margin |
$ 5.80 |
$ 10.43 |
$ 16.23 |
|
A |
Total Fixed Cost |
$ 310,000.00 |
|
B |
Weighted Average Contribution Margin |
$ 16.23 |
|
C = A/B |
Multi Product Break Even point |
19,106.32 |
|
C x 40% |
Project A |
7,642.53 |
|
C x 60% |
Project B |
11,463.79 |
|
Sales revenue at breakeven |
|||
|
Project A |
Project B |
Total |
|
|
Units sold |
7,643 |
11,464 |
|
|
Price per Unit |
$ 21.45 |
$ 25.03 |
|
|
Total sales revenue |
$ 163,932.20 |
$ 286,881.36 |
$ 450,813.56 |
New breakeven= Overall 19,106.32 units
Project A 7,642.53 units
Project B 11,463.79 units.
Breakeven sales = $450,813.56
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