Homework Answers
Insight inc.
Contribution per unit: ($)
| W | X | Y | Z | |
| Selling price | 80 | 60 | 95 | 103 |
| Less: Variable cost | (59) | (36) | (72) | (87) |
| Contribution per unit | 21 | 24 | 23 | 16 |
Sales mix:
| W | X | Y | Z | Total | |
| Budgeted production (units) | 7,600 | 6,800 | 9,300 | 5,800 | 29,500 |
| Sales mix (%) |
(7,600/29,500) 25.76% |
(6,800/29,500) 23.05% |
(9,300/29,500) 31.53% |
(5,800/29,500) 19.66% |
100% |
Weighted average contribution per unit:
| W | X | Y | Z | |
| Contribution per unit ($) | 21 | 24 | 23 | 16 |
| Sales mix (%) | 25.76% | 23.05% | 31.53% | 19.66% |
| Contribution per unit × Sales mix |
(21×25.76%) 5.41 |
(24×23.05%) 5.53 |
(23×31.53%) 7.25 |
(16×19.66%) 3.14 |
Weighted average Contribution per unit = (5.41+5.53+7.25+3.15) = $ 21.34
Break even point (company) = Fixed cost / Weighted average contribution per unit
= $ 950,000/21.34 = 44,517 units (approximately)
| W | X | Y | Z | Total | |
| Break even point (Company)(in units) | 44,517 | 44,517 | 44,517 | 44,517 | |
| Sales mix | 25.76% | 23.05% | 31.53% | 19.66% | 100% |
| Product units @ BEP (BEP × Sales mix)(in units) | 11,467.58 | 10,261.17 | 14,036.21 | 8,752.04 | |
| Selling price | $ 80 | $ 60 | $ 95 | $ 103 | |
| Break even sales (BEP units × Selling price) |
(11,467.58×80) $ 917,406 |
(10,261.17×60) $ 615,670 |
(14,036.21×95) $ 13,33,440 |
(8,742.04×103) $ 901,406 |
37,67,976 |
Margin of safety = (Actual sale - Break even sales) / Actual sale
= (50,00,000-37,67,976)/50,00,000
= 12,32,024/50,00,000
Margin of safety is 24.64%
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