3-21 Breakeven analysis; multiproduct CVP analysis (LO 1, 5) Kitchenware, Inc., sells two types of water...

3-21 Breakeven analysis; multiproduct CVP analysis (LO 1, 5)

Kitchenware, Inc., sells two types of water pitchers, plastic and glass. Plastic pitchers cost the company $15 and are sold for $30. Glass pitchers cost $24 and are sold for $45. All other costs are fixed at $982,800 per year. Current sales plans call for 14,000 plastic pitchers and 42,000 glass pitchers to be sold in the coming year.

Required

a. How many pitchers of each type must be sold to break even in the coming year?

b. Kitchenware, Inc., has just received a sales catalog from a new supplier that is offering plastic pitchers for $13. What would be the new breakeven point if managers switched to the new supplier?

Expert Solution

A	Break Even Units
	Fixed Cost/Contribution Per Unit=$982800/$19.5=50400 Units

	*19.5 See Below
	Contribution=Sales-variable cost
	Plastic Contribution=$30-$15=$15
	Glass Contribution=$45-$24=$21

	When two units given then we need to find out weighted average contribution

	Therefore
	Plastic Pitchers 14000
	Glass Picturers 42000
	Total 56000

	Percentage of Plastic Pitchers out of total Pitchers=14000/56000=25%
	Percentage of Glass Pitchers out of total Pitchers=42000/56000=75%


	Weighted average contribution
	Plastic Pitchers Contribution .25 + Glass Pitchers Contribution.75
	150.25 +21 .75=$19.5




B	Particulars	Amount
	Sales(plastic)	$30
	Less:Variable cost	-13
	Contribution Per Unit	$17


	Weighted average contribution
	Plastic Pitchers Contribution .25 + Glass Pitchers Contribution.75
	170.25 +21 .75=$20

	Break Even Units if switches to new supplier
	Fixed Cost/Contribution Per Unit=$982800/$20=49140 Units

ekkarill92 answered 1 year ago

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