Question

Waterways Continuing Problem 06 (Part 1) Waterways has a sales mix of sprinklers, valves, and controllers as follows. Annual expected sales: Sale of sprinklers 444,576 units at $27.00 Sale of valves 1,333,728 units at $11.00 Sale of controllers 74,096 units at $43.00 Variable manufacturing cost per unit: Sprinklers $14.00 Valves $8.00 Controllers $30.00 Fixed manufacturing overhead cost (total) $723,000 Variable selling and administrative expenses per unit: Sprinklers $1.00 Valves $1.00 Controllers $3.00 Fixed selling and administrative expenses (total) $1,564,312

Determine the sales mix based on unit sales for each product. Sprinklers Valves Controllers Sales mix % % % 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 $    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

Answer a.

Total sales = Sales of Sprinklers + Sales of Valves + Sales of Controllers
Total sales = 444,576 + 1,333,728 + 74,096
Total sales = 1,852,400

Sales mix of Sprinklers = Sales of Sprinklers / Total sales
Sales mix of Sprinklers = 444,576 / 1,852,400
Sales mix of Sprinklers = 24%

Sales mix of Valves = Sales of Valves / Total sales
Sales mix of Valves = 1,333,728 / 1,852,400
Sales mix of Valves = 72%

Sales mix of Controllers = Sales of Controllers / Total sales
Sales mix of Controllers = 74,096 / 1,852,400
Sales mix of Controllers = 4%

Answer b.

Sprinklers:

Contribution margin per unit = Selling price per unit - Variable manufacturing cost per unit - Variable selling and administrative expenses per unit
Contribution margin per unit = $27.00 - $14.00 - $1.00
Contribution margin per unit = $12.00

Valves:

Contribution margin per unit = Selling price per unit - Variable manufacturing cost per unit - Variable selling and administrative expenses per unit
Contribution margin per unit = $11.00 - $8.00 - $1.00
Contribution margin per unit = $2.00

Controllers:

Contribution margin per unit = Selling price per unit - Variable manufacturing cost per unit - Variable selling and administrative expenses per unit
Contribution margin per unit = $43.00 - $30.00 - $3.00
Contribution margin per unit = $10.00

Weighted average unit contribution margin = 24% * $12.00 + 72% * $2.00 + 4% * $10.00
Weighted average unit contribution margin = $4.72

Answer c.

Fixed expenses = Fixed manufacturing overhead cost + Fixed selling and administrative expenses
Fixed expenses = $723,000 + $1,564,312
Fixed expenses = $2,287,312

Overall breakeven point in units = Fixed expenses / Weighted average unit contribution margin
Overall breakeven point in units = $2,287,312 / $4.72
Overall breakeven point in units = 484,600

Breakeven point in units for Sprinklers = 24% * 484,600
Breakeven point in units for Sprinklers = 116,304

Breakeven point in units for Valves = 72% * 484,600
Breakeven point in units for Valves = 348,912

Breakeven point in units for Controllers = 4% * 484,600
Breakeven point in units for Controllers = 19,384