Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $571,200, and the sales mix is 20% bats and 80% gloves. The unit selling price and the unit variable cost for each product are as follows:
|Products||Unit Selling Price||Unit Variable Cost|
a. Compute the break-even sales (units) for the
overall enterprise product, E.
b. How many units of each product, baseball bats and baseball gloves, would be sold at the break-even point?
Bats contribution margin = Selling price - Variable cost
= 50 - 40
Gloves contribution margin = 130 - 80 = $50
Sales mix is 20% bats and 80% gloves therefore contribution margin will be calculated in the same ratio
Combined contribution margin
= 10*20% + 50*80%
= 2 + 40
Breakeven units = Fixed cost/ contribution margin per unit
= 13,600 units
B) Number of break even units
Bats = 13,600*20% = 2,720 units
Gloves = 13,600*80% = 10,880 units
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