Sales mix and break-even analysis
Conley Company has fixed costs of $15,525,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow:
Product | Selling Price | Variable Cost per Unit | Contribution Margin per Unit | ||||||
Yankee | $175 | $100 | $75 | ||||||
Zoro | 255 | 180 | 75 |
The sales mix for products Yankee and Zoro is 20% and 80%, respectively.
Determine the break-even point in units of Yankee and Zoro of the overall (total) product, E. If required, round your answers to the nearest whole number.
Product Yankee: _______ units
Product Zoro: _______ units
Yankee (a) | Zoro (b) | Total (a + b) | |
Contribution Margin per unit (a) | $75 | $75 | |
Sales Mix (b) | 20% | 80% | |
Weighted average contribution margin per unit (c = a*b) | $15 | $60 | $75 |
Total Fixed Costs (d) | $15,525,000 | ||
Company wide break-even point (d / c) | 207,000 | ||
Break-even point for each product based on sales mix (207,000*20/100); (207,000*80/100) | 41,400 | 165,600 | |
Therefore, break-even point for Yankee is 41,400 units and fo Zoro is 165,000 units. |
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