Question

The Wharton Company retails two​ products: a standard and a deluxe version of a luggage carrier. The budgeted income statement for next period is as​ follows

0 Data Table Total 180,000 6,336,000 4,320,000 Standard Carrier Deluxe Carrier Units sold 108,000 72,000 Revenues at $30 and $43 per unit 3,240,000 $ 3,096,000 $ Variable costs at $22 and $27 per unit 2,376,000 1,944,000 Contribution margins at $8 and 916 per unit $_ 864,000 $ 1,152,000 Fixed costs Operating income $ 2,016,000 1,400,000 616,000 Print Done

Answer 1

Break even point in units = Fixed costs/Contribution margin per unit

= 1,400,000/11.2

= 125000 units

2.Only standard are sold = 1,400,000/8 = 175000 units

Only Deluxe are sold = 1,400,000/16 = 87,500 units

3.Operating income = 120,000*8 + 60,000*16 – 1,400,000 = $520,000

Weighted average contribution margin = 8*2/3 + 16*1/3 = 10.6667

Break even point = 1,400,000/10.6667

= 131,250 units

No, different

Sales mix is very important and it determines the weighted average contribution margin and hence the break even point