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	$230		$160		20%
Tablets	440		210		80%

The estimated fixed costs for the current year are $201,960.

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.
fill in the blank 1 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:	fill in the blank 2 units
Tablets:	fill in the blank 3 units

3. Assume that the sales mix was 80% laptops and 20% tablets. Determine the estimated units of sales of the overall product necessary to reach the break-even point for the current year.
fill in the blank 4 units

Why is it so different?

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

Answer 1

a

Contribution of Product = Selling Price - Variable Cost

Contribution of laptop =230-160 = 70

Contribution of Tablets = 440-210 =230

One sales Mix Contribution = (Units of Laptop % * Contribution of laptops) + (Units of Tablets % * Contribution of Tablets)

=(20%*70)+(80%*230)

=198

Breakeven point = fixed cost/Sales mix contribution

=201960/198

=1020

So Breakven point of overall product E is 1020 units

b.

Breakeven point of laptop = breakeven total units*sales mix %

=1020*20%

=204

Breakeven point of Tablets = 1020*80%

=816

So Laptops 204 units

Tablets 816 units

c.

Sales mix is 80% and 20% for Laptop and tablets

One sales Mix Contribution = (Units of Laptop % * Contribution of laptops) + (Units of Tablets % * Contribution of Tablets)

=(80%*70)+(20%*230)

=102

Breakeven point = fixed cost/Sales mix contribution

=201960/102

=1980 units

Breakeven point of laptop = breakeven total units*sales mix %

=1980*80%

=1584

Breakeven point of Tablets = 1980*20%

=396 units

This is different. Breakeven sales mix contribution is now lower than previous as units having less Contibution has more weight than units having more contribution. Thats why Breakeven point is higher.