Question

Salvador Manufacturing builds and sells snowboards, skis and poles. The sales price and variable cost for each follows:

Product	Selling Price per Unit	Variable Cost per Unit
Snowboards	$340	$150
Skis	$390	$200
Poles	$40	$20

Their sales mix is reflected in the ratio 7:4:2. If annual fixed costs shared by the three products are $298,200. Determine the break-even point in sales dollars.

Break-even point $

Answer 1

• Workings

		Snowboards	Skis	Poles	Total
A	Selling Price per unit	$340.00	$390.00	$40.00
B	Variable cost per unit	$150.00	$200.00	$20.00
C = A - B	Contribution margin per unit	$190.00	$190.00	$20.00
	Weighted average contribution margin per unit [7+4+2 = 13]	$102.31	$58.46	$3.08	$163.85
		=190*7/13	=190*4/13	=20*2/13

• Fixed Cost = $ 298200
• Break even in sales dollars = Fixed Cost / Weighted average co0ntribution margin per unit
  = $ 298200 / 163.85
  = 1820 units

• Answer calculation

	Break even units [1820 units x Sales Mix ratio]	Selling price	Break even sales dollars
Snowboards	980	$340.00	$333,200.00
Skis	560	$390.00	$218,400.00
Poles	280	$40.00	$11,200.00
			$562,800.00

• Break even in sales dollars = $ 562800 Answer