Question

Sales Mix and Break-Even Sales New Wave Technology Inc. manufactures and sells two products, MP3 players...

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 _____

Homework Answers

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

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