Question

E7-32A: Find breakeven for a multiproduct firm (Learning Objective 4) Funtime Quadcopters plans to sell a standard quadcopter (toy drone) for $55 and a deluxe quadcopter for $85. Funtime purchases the standard quadcopter for $45 and the deluxe quadcopter for $65. Management expects to sell two deluxe quadcopters for every three standard quadcopters. The company's monthly fixed expenses are $11,900. How many of each type of quadcopter must Funtime sell monthly to break even? To earn $7,700?

Answer 1

			Standard	Deluxe	Total
Selling price			55	85
Less: variable cost			45	65
Contribution margin			10	20
sales mix			3	2
Contribution per sales mix			30	40	70
Weighted averagge CM per unit					14
Break even units= Fixed cost / Weighted Average Cm per unit
		11900 /14 = 850
Number of Std Quadcopter: (850*0.60): 510 units
Number of Deluxe Quadcopterr (850*0.40) = 340 units
Target profit = 7700
Target contribution = 7700+11900 = 19600
target sales units= Target contribution/ weighted average CM per unit
		19600/ 14 = 1400 units
Number of Std Quadcopter (1400*0.60): 840 units
Number of Deluxe Quadcopter (1400*0.40): 560 units