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Homework answers / question archive / Compute the breakeven point in units, assuming that the planned revenue mix is maintained
Compute the breakeven point in units, assuming that the planned revenue mix is maintained. 2. Compute the breakeven point in units (a) if only standard carriers are sold and (b) if only deluxe carriers are sold. 3. Suppose 180,000 units are sold, but only 60,000 of them are deluxe. Compute the operating income. Compute the breakeven point if these relationships persist in the next period. Compare your answers with the original plans and the answer in requirement 1. What is the major lesson of this problem? Requirement 1. Compute the breakeven point in units, assuming that the planned sales mix is attained. Data Table Begin by determining the sales mix. For every 2 deluxe unit(s) sold standard units are sold. Total Standard Carrier 108,000 Deluxe Carrier 72,000 Units sold 180,000 Revenues at $30 and $45 per unit $ 3,240,000 $ 2,376,000 3,240,000 $ 1,944,000 6,480,000 4,320,000 Variable costs at $22 and $27 per unit $ 1,296,000 Contribution margin at $8 and $18 per unit 864,000 $ 2,160,000 1,800,000 Fixed costs $ 360,000 Operating income
1)Weighted Contribution Margin per unit = (3 x $8 + 2 x $18) / 5 = $12 per unit
Break even point = Fixed Costs / Weighted Contribution Margin per unit
= $1800000 / 12 = 150000 units
Standard = 150000 / 5 x 3 = 90000 units
Deluxe = 150000 / 5 x 2 = 60000 units
2)
(a) Break even point = Fixed Costs / Contribution Margin per unit
= $1800000 / 8 = 225000 units of Standard
(b) Break even point = Fixed Costs / Contribution Margin per unit
= $1800000 / 18 = 100000 units of Deluxe
3)
| Standard | Deluxe | Total | |
| Units Sold | 120000 | 60000 | 180000 |
| Sales Revenue | $ 3,600,000 | $ 2,700,000 | $ 6,300,000 |
| Variable Costs | $ 2,640,000 | $ 1,620,000 | $ 4,260,000 |
| Contribution Margin | $ 960,000 | $ 1,080,000 | $ 2,040,000 |
| Fixed Costs | $ 1,800,000 | ||
| Operating Income | $ 240,000 |
Weighted Contribution Margin per unit = (2 x $8 + 1 x $18) / 3 = $11.33 per unit
Break even point = Fixed Costs / Weighted Contribution Margin per unit
= $1800000 / 11.33 = 158824 units or 158870
Standard = 158824 / 3 x 2 = 105883 units or 105913
Deluxe = 158824 / 3 x 1 = 52941 units or 52957
Break even point decreases if there is higher proportion of Standard since it has lower unit contribution margin
