Question

SALES MIX BREAKEVEN

Wich Brothers sells two kinds of sandwiches – meat and veggie.  Information on sales for July follow:

	Meat	Veggie	Totals
Number of sandwiches	9,000	6,000	15,000
Sales	$72,000	$60,000	$132,000
Variable costs	27,000	15,000	42,000
Contribution Margin	45,000	45,000	90,000
Fixed costs	24,000	30,000	54,000
Operating income	$21,000	$15,000	$36,000

The sales mix is expected to remain steady.

10.  Determine the number of units and sales revenue for each product at the breakeven point.  (Round up to the nearest unit and dollar.)

Approximately how many units of meat should be sold to break even?

  Approximately how many units or veggie should be sold to break even?

What would be the approximate sales of meat in dollars to break even?

What would be the approximate sales of veggie in dollars to break even?

Answer 1

Weighted average contribution margin per unit = Total contribution margin/Number of units

= 90,000/15,000

= $6 per unit

Weighted average CM Ratio = Contribution Margin/Sales

= 90,000/132,000

= 68.18181818%

Number of units for break even = Fixed costs/Weighted average CM per unit

= 54000/6

= 9,000 units

Units of meat = 9000*9000/15000 = 5,400 units

Veggie = 9000*6000/15000 = 3,600 units

Break even Sales revenue = Fixed costs/CM Ratio

= 54000/68.18181818%

= $79,200

approximate sales of meat in dollars to break even = 5400*8 = $43,200

approximate sales of veggie in dollars to break even = 3600*10 = $36,000