Question

Sales Mix and Break-Even Sales

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:

Products |
Unit Selling Price |
Unit Variable Cost |
Sales Mix |
|||

Laptops | $1,000 | $500 | 40% | |||

Tablets | 600 | 300 | 60% |

The estimated fixed costs for the current year are $6,384,000.

**Required:**

**1.** Determine the estimated units of sales of
the overall (total) product, E, necessary to reach the break-even
point for the current year.

units

**2.** Based on the break-even sales (units) in
part (1), determine the unit sales of both laptops and tablets for
the current year.

Laptops | units |

Tablets | units |

**3.** Assume that the sales mix was 60% laptops
and 40% tablets. Compare the break-even point with that in part
(1). Why is it so different?

units

The break-even point is in this scenario than in part (1) because the sales mix is toward the product with the higher of product.

Answer #1

Answer | |||

1 | |||

Weighted average unit contribution margin | 380 | (1000-500)*40%+(600-300)*60% | |

Break-even point for the current year |
$ 16,800 |
units |
6384000/380 |

2 | |||

Laptops |
$ 6,720 |
units |
16800*40% |

Tablets |
$ 10,080 |
units |
16800*60% |

3 | |||

Weighted average unit contribution margin | 420 | (1000-500)*60%+(600-300)*40% | |

Break-even point for the current year |
$ 15,200 |
units |
6384000/420 |

The break-even point is lower in this scenario
than in part (1) because the sales mix is weighted more
heavily toward the product with the higher
contribution margin per unit of product. |
|||

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