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24-8. Sales mix and break-even analysis. Rite-Beverage Bottling Company produces a variety e bottled drinks. The company has classified its products into these three basic categories SALES PRICE VARIABLE COST BRAND PER CASE PER CASE Trade-Name. True-Ade..$1.50 Dietary. $1.40 1.20 1.00 1.00 40 The fixed cost of the company is $37 240 annually and does not change with any changer product mix or with total volume changes of less than 50%. During 19A, sales of Trade-Name Dietary. Total sales revenue for the year was $500,000. Required: accounted for 50% of the companys total sales in cases. Sales of True-Ade were four times that (1) The break-even sales in dollars and units of, each product group for 19A, based on o d actually experienced sales mix. (Round the contribution margin ratio to tw places.) (2) The amount which could be spent for advertising in 198 to increase sales of the mo 0f profitable lines, with the company making a profit of one and one-half times tn the-same total sales revenue, and Tru-Ade sales accounting for 60% of sal imes that of Ta in case 19A s In Dietary, 20%; and Trade-Name, 30%.

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1 Total sale of a company 100% 50% 40% Sale of Trade name Sale of True ade (4times of Dietrary i.e 50%*4/5) Sale of Dietrary (Sale of True ade is 4times of Dietrary i.e 50%*1/5) 10% Computation of variable cost Trade Name: Sale value in dollars (50% of total sale i.e., $500000*50%) Sale value in cases ($250000/$1.50) (Rounded off to nearest number) Variable cost (166667 Units*$1.4) $250000 166667 Units $233333.80 True ade Sale value in dollars (40% of total sale i.e., $500000*40%) Sale value in cases ($200000/$1.20) (Rounded off to nearest number) Variable cost (166667 Units*$1) $200000 166667 Units $166667 Dietrary Sale value in dollars (10% of total sale i.e., $500000*10%) Sale value in cases ($50000/$1.00) (Rounded off to nearest number) Variable cost (50000 Units $.40) $50000 50000 Cases $20000 Fixed cost of the company $37240 which shall be shared among each product mix equally i.e $12413.33Computation of break even point Trade Name: Break even point in Units- Fixed Expenses/(Sales Price per unit - Variable expenses per unit) $12413.33/($1.5-$1.4) 1241 units Break even point in Dollars- Break even point in Units*Sales price per unit 1241 units*$1.5 $1861.5 True ade Fixed Expenses/(Sales Price per unit - Variable expenses per unit) $12413.33/($1.20-$1) 2483 Units Break even point in Units- Break even point in Dollars- Break even point in Units*Sales price per unit 2483 Units $1.2 $2979.6 Dietrary Break even point in Units- Fixed Expenses/(Sales Price per unit - Variable expenses per unit) $12413.33/($1-S.40) 7448 Cases Break even point in Dollars- Break even point in Units*Sales price per unit 7448 Cases*$1 $7448 Contribution Margin Ratio Trade Name: Contribution Margin Ratio (Sales-Variable expenses)/Sales ($250000-$233333.80)/$250000 6.67% True ade (Sales-Variable expenses)/Sales ($200000-$166667)/$200000 Contribution Margin Ratio 16.67% Dietrary Contribution Margin Ratio (Sales-Variable expenses)/Sales ($50000-$20000)/$50000 60.00%2 Statement showing Operating profit Trade Name: Sales Variable Expenses Contribution Margin Fixed Expenses Operating profit $250000 $233333.80 $16666.2 $12413.33 4252.87 True ade Sales Variable Expenses Contribution Margin Fixed Expenses Operating profit $200000 166667 12413.33 S20919.67 Dietrary Sales Variable Expenses Contribution Margin Fixed Expenses Operating profit $50000 $20000 $30000 12413.33 $17586.67 Let us assume the company desire to spend on advertisement as follows Trade Name True ade Dietrary $100000 $80000 50000 the required number of cases to be sold is as follows Trade Name Desired profit ($4252.87*1.5) Fixed cost ($12413.33+$100000) Variable Margin per unit (Sale price-Variable cost) ($1.5-1.4) Let us assume no. of cases to be produced is X $6379.31 112413.33 0.1 Profit Variable margin Fixed expenses $6379.31- (X.1)-$112413.33 0.1X $6379.31+$112413.33 0.1X-$118792.64 X- 1187926 Cases True ade Desired profit ($20919.67*1.5) Fixed cost ($12413.33+$100000) Variable Margin per unit (Sale price-Variable cost) $31379.51 $112413.33 0.2 Let us assume no. of cases to be produced is XProfit Variable margin - Fixed expenses $31379.51-(S.2X-$112413.33) 0.2X-$31379.51+$112413.33 0.2X-$143792.84 X-718964 Cases Dietrary Desired profit ($20919.67 1.5) $26380.01 Fixed cost ($12413.33+$100000) Variable Margin per unit (Sale price - Variable cost) ($1.0-$.4) Let us assume no. of cases to be produced is X $112413.33 1.0 Profit-Variable margin - Fixed expenses $26380.01-(0.6X-$112413.33) 0.6X-$26380.01+$112413.33 X 231322 Cases

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