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LACILISE VJU IVIUILIPITIUuuuur Kudly SIS LO Smith Company can produce two types of carpet cleaners, Brighter and Cleaner. Dat

Required 1 Required 2 Required 3 At this breakeven level, how many units of each product must be sold? Due to rounding, the t

Required 1 Required 2 Required 3 Using the Indirect approach, what is the overall breakeven point in sales dollars? Use the b

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Answer #1

Solution : 1. Calculation of Break Even Point in total units for Smith Company :-

Particulars Brighter Cleaner
Selling Price per unit $ 1000 $ 1000
Less : Variable Costs per unit $ 200 $ 700
Contribution Margin Per Unit $ 800 $ 300
Brighter Cleaner
Contribution Margin Per Unit $ 800 $ 300
Sales Mix (Based on Units) 400 Units / 1000 Units = 0.4 600 Units / 1000 Units = 0.6
Weighted Average CM Per Unit 0.4* $800 +0.6* $300 = $ 500
Total Fixed Costs $ 300000
Breakeven in Units Total Fixed Costs/ Weighted Average CM per unit
= $ 300000 / S 500 = 600 Units

2. Calculation of Break Even Point for each product :-

Brighter Cleaner Total
Sales Mix 0.4 i.e 40% 0.6 i.e 60% 100%
Breakeven in Units 600 Units *40% = 240 Units 600 Units * 60% = 360 Units 600 Units

3. Calculation of Overall Breakeven in Unit Dollars :-

Breakeven Point in Units = 600 Units

Selling Price Per Unit = $ 1000

Breakeven Point in Unit Dollars = Breakeven point in Units * Selling Price per Unit

= 600 Units * $ 1000 = $ 600000

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