In: Accounting
Sales Mix and Break-Even Analysis
Heyden Company has fixed costs of $1,640,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow:
Product | Selling Price | Variable Cost per Unit | Contribution Margin per Unit | ||||||
$660 | $340 | $320 | |||||||
ZZ | 820 | 600 | 220 |
The sales mix for Products QQ and ZZ is 30% and 70%, respectively. Determine the break-even point in units of QQ and ZZ. If required, round your answers to the nearest whole number.
a. Product QQ units
b. Product ZZ units
Solution
Product QQ | 1,968 Units |
Product ZZ | 4,592 Units |
Working
Working | Product QQ | Product ZZ | TOTAL | |
A | Revenues | $ 660.00 | $ 820.00 | |
B | Variable Cost | $ 340.00 | $ 600.00 | |
C = A - B | Contribution Margin | $ 320.00 | $ 220.00 | |
D | Product Mix | 30.00% | 70.00% | 100.00% |
E = C x D | Weighted Average Contribution Margin | $ 96.00 | $ 154.00 | $ 250.00 |
.
A | Total Fixed Cost | $ 1,640,000.00 |
B | Weighted Average Contribution Margin | $ 250.00 |
C = A/B | Multi Product Break Even point | 6,560 |
C x 30% | Product QQ | 1,968 |
C x 70% | Product ZZ | 4,592 |