Question

Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below.

	basic	basic plus	premium	total
units sold	1,200	420	380	2,000
selling price	246	395	795
variable cost	197	290	417

The company’s total fixed costs to produce the filtration systems are $147,924.

a) Determine the sales mix as a function of units sold for the three products. (Round answers to 0 decimal places, e.g. 12.)

	basic	basic plus	premium
the sales mix as a function of units sold	%	%	%

b) Determine the weighted-average unit contribution margin. (Round answer to 2 decimal places, e.g. 10.25.)

weighted-average unit contribution margin

$

c) Determine the total number of units that the company must produce to break even.

break-even point in units

d) Determine the number of units of each model that the company must produce to break even.

basic	units
basic plus	units
premium	units

Answer 1

Req 1:
			Basic	Basic Plus	Premium	Total
Units Sold			1200	420	380	2000
Units sold as % of Total			60%	21%	19%	100%
Req 2:
			Basic	Basic Plus	Premium	Total
Selling Price per unit			246	395	795
Less: Variable cost per unit			197	290	417
Contribution margin per unit			49	105	378
Sales Mix			60%	21%	19%
Weighted Contribution			29.4	22.05	71.82	123.27
Weighted Contribution margin per unit: $ 123.27
Req 3:
Total Fixed cost: $ 147924
Weighted Average Contribution per unit: $ 123.27 per unit
Break even in units: Total Fixed cost/ Weighted average CM per unit
		$147924 / 123.27 = 1200 units
Req 4:
Nnumber of Units of each model to be sold:
Basic	(1200*60%)		720 units
Basic Plus	(1200*21%)		252 units
Premium	(1200*19%)		228 units