Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models...

Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below. Basic Basic Plus Premium Total Units sold 1,071 391 238 1,700 Selling price $252 $399 $804 Variable cost $194 $293 $416 The company’s total fixed costs to produce the filtration systems are $126,764.

Determine the sales mix as a function of units sold for the three products

Determine the weighted-average unit contribution margin

Determine the total number of units that the company must produce to break even.

Solutions

Expert Solution

(a) Answer to Part (1)
S.No	Particulars	Basic	Basic Plus	Premium	Total
(a)	Units sold	1071	391	238	1700
(b)	Sales mix	63%	23%	14%
(b)	Sales mix	(1071/1700)*100	(391/1700)*100	(238/1700)*100

(b) Answer to Part (2)
S.No	Particulars	Basic	Basic Plus	Premium	Total
(a)	Selling price per unit	252	399	804
(b)	Less: Variable cost per unit	194	293	416
(c )	Contribution margin per unit [(a) - (b)]	58	106	388
(d)	Units sold	1071	391	238	1700
(e )	Total Contribution [(c )*(d)]	62118	41446	92344	195908
	Weighted-average unit contribution margin (195908/1700)				130.61

(c) Answer to Part (3)
(a)	Total Fixed Costs	126764
(b)	Weighted-average unit contribution margin (195908/1700)	130.61
( c)	Total number of units that the company must produce to break even (126764/130.61)	971

ekkarill92 answered 1 year ago

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