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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%
(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 2 years ago
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