Question

Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 15,900 portable grills, 47,700 stationary grills, and 5,300 smokers. Information on the three models is as follows: Portable Stationary Smokers Price $92 $199 $246 Variable cost per unit 50 127 136 Total fixed cost is $1.918,280 Required: 1. What is the sales mix of portable grills to stationary grills to smokers?

Answer 1

1. Calculation of sales mix

Particulars	Portable	Stationery	Smokers	Total
Units sold	15900	47700	5300	68900
Sales mix (units sold/ total units)	23.08%	69.23%	7.69%	100%

2.Break even quantity of each product ( if individually sold)

Particulars	Portable	Stationery	Smokers
Units sold	15900	47700	5300
Sales price per unit	92	199	246
Variable cost per unit	50	127	136
Contribution per unit	42	72	110
Fixed cost	1,918,280	1,918,280	1,918,280
Breakeven units ( fixed cost / contribution per unit)	45674	26643	17439

Break even sales units if to be sold in sales mix ratio

Requiered contribution =$1,918,280

Particulars	Portable	Stationery	Smokers	Total
Sales mix (units sold/ total units)	23.08%	69.23%	7.69%	100%
Required contribution in above mix ratio	442,739	1,328,025	147,516	1,918,280
Contribution per unit	42	72	110
Breakeven units ( fixed cost / contribution per unit)	10542	18445	1341

3.

Particulars	Portable	Stationery	Smokers	Total
Units sold (A)	15900	47700	5300
Sales price per unit	92	199	246
Variable cost per unit	50	127	136
Contribution per unit (B)	42	72	110
Total sales ( S)	1,462,800	9,492,300	1,303,800	12,258,900
Total Contribution (A*B)=C	667,800	3,434,400	583,000	4,685,200
Contribution margin (C/S)	45.65%	36.18%	44.72%	38.22%

For the question, Overall contribution margin =38.22%

Overall breakeven sales =Fixed cost/ Contribution margin =$1,918,280/38.22%

                                        =$5,019,048

4. Overall margin of safety

Current sales level =$12,258,900

breakeven sales = $5,019,048

Margin of safety = (Current sales level-breakeven sales)/Current sales level

                         =(12,258,900 - 5,019,048)/12,258,900

                         =59.06%

Note: in case of any doubt, please comment in comment section