Question

Example of Multi-Product Sales 2 ABC Travel and Tours Company produces and sells two types of DVDs - the VR DVD which features a tour of tourist attractions in the Volta Region and the CR DVD which features a tour of the famous castles along the coastal line in Ghana. The Company's December 2018 statement of sales and expenses are as follows: VR DVD CR DVD Total Percent of sales Total Percent of sales C20,000 100% C80,000 100% Var Expenses C15,000 75% C40,000 50% $5,000 25% 040,000 50% Sales CM Fixed costs are c27,000 Required: 1) Compute the overall breakeven point in cedis 2) Split the breakeven sales into the individual products sales 3) Verify that the breakeven point in cedis for the individual products is achieved.

Answer 1

>> Sales mix = 20000 : 8000 = 1:4 >> Combined CM Ratio = [(25 %* (1/5))+ ( 50 %*(4/5))] = 45 % >> Break even point = (Fixed cost / Combined CM Ratio) >> Break even point = ( 27000 / 45 % ) = 60000 >> Break even point of VR DVD = 60000 * (1/5) = 12000 >> Break even point of CR DVD = 60000 * (4/5) = 48000 >> Both VR DVD and CR DVD has achived break even point.