Question

Bluebird Sports, Inc., produces high quality sports equipment. The company's Racket Division manufactures two tennis rackets - the Standard and the Deluxe- that are widely used in amateur play. Selected information on the rackets is given below:

Standard Deluxe

Selling price per racket $100.00 $180.00

Variable expenses per racket:

Production $40.00 $72.00

Sales commission 5% 10% of price

total fixed cost(for standard and deluxe) $149,000

all sales are made through the company's own retail outlets.

the company plans to produce and sell three times as many standard as deluxe model month. how many units of the standard model does the company have to sell to break even?

Answer 1

			Standard	Deluxe	Total
Selling price per unit			100	180
Less: Variable Production cost per unit			40	72
Sales commission			5	18
Contribution Margin per unit			55	90
Sales mix			3	1
Weighted contribution margin			165	90	255
Fixed cost: 149000
Break even sales mix units: Fixed cost / Weighted contribution margin per sales mix
			149000 /255 = 584.32
Number of units of Std Product to be sold= 584.32 *3 = 1753 units