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	$260		$180		30%
Tablets	520		240		70%

The estimated fixed costs for the current year are $616,000.

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 70% laptops and 30% tablets. Determine the estimated units of sales of the overall product necessary to reach the break-even point for the current year.
units

Why is it so different?

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

Answer 1

Q1.

Per unit:	Laptops	Tablets	Total
Selling price	$               260	$                   520	$         780
Less: Variable cost	$               180	$                   240	$         420
Contribution	$                  80	$                   280	$         360
Sales Mix	30%	70%	100%
Weighted avg.Contribution	$                  24	$                   196	$         220
Total Breakeven sales in units:
Fixed Cost	$ 616,000.00 =	2,800 units
Weighted Average Contribution margin per unit	$ 220

********************

Q2.

Break even points in units for both:
Laptop : 2,800 units * 30% =	840 units
Tablets : 2,800 units * 70% =	1,960 units

*******************

Q3.

*Break even should change, if sales mix proportion would change. Then,It Impacts the Contribution margin and Overall Weighted average contribution margin.

* The Break-even point will depend on the mix in which the various products are sold.

*Break evn point in units = 4,400 units;

*Contribution margin: Laptop- $56; Tablets- $84.

Per unit:	Laptops	Tablets	Total
Selling price	$               260	$                   520	$         780
Less: Variable cost	$               180	$                   240	$         420
Contribution	$                  80	$                   280	$         360
Sales Mix	70%	30%	100%
Weighted avg.Contribution	$                  56	$                     84	$         140
Total Breakeven sales in units:
Fixed Cost	$ 616,000.00 =	4,400 units
Weighted Average Contribution margin per unit	$ 140
Break even points in units for both:
Laptop : 4,400 units * 70% =	3,080 units
Tablets : 4,400 units * 30% =	1,320 units

**********************************************************************************************

If you have any doubts, drop your messages in the comment box! Thank you!!!  ALL THE BEST!!!!
Please rate this answer, If you like the answer, kindly raise your THUMBS-UP button.
#STAY SAFE