Question

Sales Mix and Break-Even Sales

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $169,100, and the sales mix is 70% bats and 30% gloves. The unit selling price and the unit variable cost for each product are as follows:

Products	Unit Selling Price		Unit Variable Cost
Bats	$40		$30
Gloves	100		60

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

b. How many units of each product, baseball bats and baseball gloves, would be sold at break-even point?

Baseball bats	units
Baseball gloves	units

part 2.

Break-Even Sales and Sales Mix for a Service Company

Zero Turbulence Airline provides air transportation services between Los Angeles, California; and Kona, Hawaii. A single Los Angeles to Kona round-trip flight has the following operating statistics:

Fuel	$12,352
Flight crew salaries	9,461
Airplane depreciation	4,467
Variable cost per passenger—business class	55
Variable cost per passenger—economy class	45
Round-trip ticket price—business class	555
Round-trip ticket price—economy class	285

It is assumed that the fuel, crew salaries, and airplane depreciation are fixed, regardless of the number of seats sold for the round-trip flight. If required round the answers to nearest whole number.

a. Compute the break-even number of seats sold on a single round-trip flight for the overall product, E. Assume that the overall product is 20% business class and 80% economy class seats.

Total number of seats at break-even

seats

b. How many business class and economy class seats would be sold at the break-even point?

Business class seats at break-even	seats
Economy class seats at break-even	seats

Answer 1

1a) Weighted average contribution margin per unit = (40-30)*70%+(100-60)*30% = 19 per unit

Break even point (unit) = Fixed cost/Weighted average contribution margin per unit

= 169100/19

Break even point (unit) = 8900 Units

1b) Baseball bats = 8900*70% = 6230 Units

Baseball gloves = 8900*30% = 2670 Units

2a) Fixed cost = 12352+9461+4467 = 26280

Weighted average contribution margin per unit = (555-55)*20%+(285-45)*80% = 292 Per unit

Break even point = 26280/292 = 90 Seats

2b) Business class seats at break even = 90*20% = 18 Seats

Economy class seats at break even = 90*80% = 72 seats