Question

Sales Mix For Product A: SP/u = $10; VC/u = $7, budget sales (units) 6,000 For...

Sales Mix

For Product A: SP/u = $10; VC/u = $7, budget sales (units) 6,000

For Product B: SP/u = $18; VC/u = $14, budget sales (units) 18,000

Total Fixed costs = $75,000

Find BEP in $ and units for A and B

Business   Accounting   
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Answer #1

Total budgeted sales = Budgeted sales for Product A + Budgeted sales for Product B = 6,000+18,000 = 24,000 units

Product A Product B
Sales mix percentage 6,000÷24,000×100 = 25% 18,000÷24,000×100 = 75%
Product A Product B Selling price per unit $10 $18 Less: Variable cost per unit 7 14 Contribution margin per unit $3 $4 × Sales mix percentage 25% 75% $0.75 $3

Weighted average Contribution margin per unit = 0.75+3 = $3.75

Break even point in unit of sales mix = Fixed cost ÷ Weighted average Contribution margin per unit = 75,000÷3.75 = 20,000 units

Product A Product B
Sales mix percentage 25% 75%
× Total break even units 20,000 20,000
Break even units 5,000 units 15,000 units
Product A Product B
Break even units 5,000 units 15,000 units
× Selling price per unit $10 $18
Break even point in dollars $50,000 $270,000
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