Question

Sales Mix and Break-Even Sales New Wave Technology Inc. manufactures and sells two products, MP3 players and satellite radios. The fixed costs are $325,600, and the sales mix is 60% MP3 players and 40% satellite radios. The unit selling price and the unit variable cost for each product are as follows:

Products Unit Selling Price Unit Variable Cost

MP3 players $80 $60

Satellite radios 200 120

a. Compute the break-even sales (units) for both products combined. units

b. How many units of each product, MP3 players and satellite radios, would be sold at the break-even point?

MP3 players units ____

Satellite radios units _____

Answer 1

a.

0

	MP3 players	Satellite radios	Total
selling price per unit	80	200
variable cost per unit	-60	-120
contribution margin per unit	20	80
sales mix	60%	40%
Weighted average contribution margin per unit	12	32	44

Weighted average contribution margin per unit = $44

Number of units at break even = Total fixed cost/ Weighted average contribution margin per unit

= 325,600/44

= 7,400

b.

Break even quantity of MP3 players = Number of units at break even x Sales mix proportion of MP3 players

= 7,400 x 60%

= 4,440

Break even quantity of Satellite radios = Number of units at break even x Sales mix proportion of Satellite radios

= 7,400 x 40%

= 2,960

MP3 players units 4,440

Satellite radios units 2,960

Kindly comment if you need further assistance. Thanks