Homework Answers
| 1) | |||
| Small | Medium | Large | |
| Sales price per unit | P400.00 | P700.00 | P1,750.00 |
| Variable costs per unit | P150.00 | P200.00 | P450.00 |
| Contribution margin | P250.00 | P500.00 | P1,300.00 |
| Weights | 20% | 60% | 20% |
| Weighted-average contribution margin | P50.00 | P300.00 | P260.00 |
| Total weighted average contribution margin | P610.00 | ||
| BEP(units) = Fixed Cost/Total weighted average contribution margin | |||
| BEP(units) = P19,520,000/P610 | 32,000.00 | Umbrellas. | |
| 2) | |||
| Medium umbrellas need to be sold in order to break even are 32,000 umbrellas x 60% | 19,200.00 | Umbrellas. | |
| The break-even point will decrease if the sales mix changes so that more large umbrellas are sold than previously assumed. It will decrease because the overall weighted-average contribution margin will increase since the large umbrellas have a higher contribution margin per unit, and if more of them are sold, their weight as a percentage of sales will also increase. These two effects will cause the overall weighted contribution margin to increase. |
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