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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