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Sales Mix and Margin of Safety Northwest Technology Inc. manufactures and sells two products, digital game players and comput

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· Requirements

Requirement 1

Requirement 2

Requirement 3

[a]

Units sold

6300

2700

9000

[b]

Sales dollars

$315,000

$324,000

$639,000

[c]

A Percentage

20%

20%

20%

· Workings

Game players

Tablets

Total

A

Selling price

$50

$120

B

Variable cost

$30

$80

C = A -B

Contribution margin

$20

$40

D

Sales Mix

70%

30%

E = C x D

Weighted average CM per unit

$14.00

$12.00

$26.00

A

Total Fixed Cost

$936,000

B

Total Weighted average CM per unit

$26

C = A/B

Total Break even units

36000

D = C x Sales Mix %

Game Player Break even unit

25200

E = C x Sales Mix %

Tablets Break even units

10800

Game Player

Tablets

Total

A

Actual sales units

31500

13500

45000

B

Break even sales units

25200

10800

36000

C = A - B

Margin of Safety in 'units sold'

6300

2700

9000

D

Sale price per unit

$50

$120

E = C x D

Total margin of safety sales

$315,000

$324,000

$639,000

F = (C/A) x 100

A Percentage

20%

20%

20%

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