Question

Waterways has a sales mix of sprinklers, valves, and controllers as follows.

Annual expected sales:
Sale of sprinklers		438,768 units at $27.00
Sale of valves		1,515,744 units at $11.00
Sale of controllers		39,888 units at $43.00

Variable manufacturing cost per unit:
Sprinklers		$14.00
Valves		$8.00
Controllers		$30.00
Fixed manufacturing overhead cost (total)				$755,000

Variable selling and administrative expenses per unit:
Sprinklers		$1.00
Valves		$1.00
Controllers		$3.00
Fixed selling and administrative expenses (total)				$1,495,632

Determine the sales mix based on unit sales for each product.

		Sprinklers		Valves		Controllers
Sales mix		%		%		%

eTextbook and Media

  

  

Using the annual expected sales for these products, determine the weighted-average unit contribution margin for these three products. (Round answer to two decimal places, e.g. 5.25.)

Weighted-Average Unit Contribution Margin

$ ___________________

eTextbook and Media

  

  

Assuming the sales mix remains the same, what is the break-even point in units for these products? (Round answer to 0 decimal places, e.g. 2,520.)

Break-even Point in Units

______________

units

Answer 1

• All working forms part of the answer
• [1]

		Sprinklers	Valves	Controllers	Total
A	Expected sales	438,768	1,515,744	39,888	1,994,400
B = A / 1994400	Sales Mix % of total sale	22.00%	76.00%	2.00%	100.00%

• [2]

		Sprinklers	Valves	Controllers	Weighted Average Contribution margin per unit
A	Sale price	$27	$11	$43
B	Variable cost per unit	$15	$9	$33
C = A - B	Contribution margin per unit	$12	$2	$10
D	Sales Mix % of total sale	22.00%	76.00%	2.00%
E = C x D	Weighted average contribution margin per unit	$2.64	$1.52	$0.20	$4.36 [Answer]

• [3]

A	Fixed manufacturing overhead	$755,000
B	Fixed selling & admin expenses	$1,495,632
C = A+B	Total Fixed expenses	$2,250,632
D	Weighted average contribution margin per unit	$4.36
E = C/D	Break even point in units	516200	units = Answer