Question

EXERCISES: Set A (continued) 30. Break-Even Point and Target Profit Measured in Units (Multiple Products a. Start by calculating the contribution margin for each product Sweater contribution margin- Jacket contribution margin- per unit per unit Then, calculate the weighted average contribution margin per unit: Weighted average contribution margin per unit = ) + ( b. The break-even point in units is calculated as: c. Break-even point in units for each product is: Sweater Jacket Total units (= units (= units d. The target profit point in units is calculated as: e. The target profit point for each product is: units (= X = 0% % ) Sweater Jacket Total units (= units Question 30

Answer 1

a.	Sweater contribution margin	100	-	40	=	60	Per unit
	Jacket contribution margin	400	-	240	=	160	Per unit
	Weighted average contribution margin per unit	=		60 x 70%	+	160 x 30%
			=	42	+	48
			=	90
b.	Breakeven in units	Fixed cost	/	Contribution margin per unit
		$1,800,000	/	90
		20,000
c.	Breakeven point in units
	Sweater	14,000		(20000*70%)
	Jacket	6,000		(20000*30%)
	Total	20,000		Units
d.	Total units to be sold for target profit=		(fixed cost+target profit)/contribution per unit
			=	(1800000+360000)/90
			=	24,000	Units
e.	The Target profit point for each product is
	Sweater	16,800		(24000*70%)
	Jacket	7,200		(24000*30%)
	Total	24,000

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