Question

Scotty Quadcopters plans to sell a standard quadcopter (toy drone) for $60 and a deluxe quadcopter for $90. Scotty purchases the standard quadcopter for $50 and the deluxe quadcopter for $65. Management expects to sell two deluxe quadcopters for every three standard quadcopters. The company's monthly fixed expenses are $12,800. How many of each type of quadcopter must Scotty sell monthly to breakeven? To earn $9,600?

Answer 1

Solution:

1. Break even sales in total units = 800

Break even sales of standard quad copters = 480

Break even sales of deluxe quad copters   = 320

2.

Targeet sales in total units = 1,400

Target sales of standard quad copters  = 840

Target sales of deluxe quad copters = 560

Explanation:

Scotty quadcopters

Weighted average contribution margin perunit

	Standard	Deluxe	Total
Sales price per unit	$60	$90
Less: Variable expenses per unit	$50	$65
Contribution marginper unit	10 (60-50)	25 (90-65)
Sales mix in units	3	2
Contribution margin	30 (10 x 3)	50 (25 x 2)	$80
Weighted average contribution margin per unit			$16 (80/5)

Sales in total units = Fixed cost / Weighted average contribution margin per unit = $12,800/$16 = 800

Break even sales of standard quad copters = 800 x 3/5 = 480

Break even sales of deluxe quad copters =800 x 2/5 = 320

Sales in total units = (Fixed cost + desired profit ) /weighted average contribution margin per unit

= (12800+9600) / 16 = 1,400

Target sales of standard quad copters = 1,400 x 3/5 = 840

Target sales of deluxe quad copters = 1400 x 2/5 = 560