Question

Skippy Scooters plans to sell a motorized standard scooter for 570 and a motorized chrome scooter for 585. Skippy Scooters purchases the standard scooter for $55 and the chrome scooter for $65. Skippy Scooters expects to sell two chrome scooters for every three standard scooters. Skippy Scooters' monthly fixed expenses are $16,150. How many of each type of scooter must Skippy Scooters sell monthly to break even? To eam S11,9007 First, identify the formula to compute the sales in units at various levels of operating income using the contribution margin approach = Break even sales in units je contribution margin per unit. First identify the formula labels, then complete the calculations step by step Standard Chrome Total Ne Contribution margin ratio Fixed expenses Operating income Units sold De Variable expenses Weighed-avg CM per unit . Weighted average contribution margin per unit Choose from any list or enter any number in the input fields and then continue to the next question Save for Lates SISAN ENG ее o iti HE Type here to search

Answer 1

Answer 1)

Calculation of number of units of each product to be sold to break-even

Total number of units of both product to be sold at break-even = Total monthly fixed expenses/ Weighted average contribution margin per unit

                                                                                    = $ 16,150/ $ 17 per unit

                                                                                    = 950 units

Number of units of Standard scooter to be sold at break-even = Total number of units to be sold at break-even X sales mix of Standard scooter

                                                                                                                        = 950 units X 60%

                                                                                                                        = 570 units

Number of units of Chrome scooter to be sold at break-even = Total number of units to be sold at break-even X sales mix of Chrome scooter

                                                                                                                        = 950 units X 40%

                                                                                                                        = 380 units

Therefore 570 units of Standard Scooter and 380 units of Chrome Scooter will be sold at break-even.

Answer 2)

Calculation of number of units of each product to be sold if the company wishes to earn monthly income of $ 11,900

Total number of units of both product to be sold at break-even = (Total monthly fixed expenses + Expected monthly Income)/ Weighted average contribution margin per unit

                                                                                    = ($ 16,150 + $ 11,900)/ $ 17 per unit

                                                                                    = 1,650 units

Number of units of Standard scooter to be sold to earn monthly income of $ 11,900 = Total number of units to be sold at break-even X sales mix of Standard scooter

                                                                                                                        = 1,650 units X 60%

                                                                                                                        = 990 units

Number of units of Chrome scooter to be sold to earn monthly income of $ 11,900 = Total number of units to be sold at break-even X sales mix of Chrome scooter

                                                                                                                        = 1,650 units X 40%

                                                                                                                        = 660 units

Therefore 990 units of Standard Scooter and 660 units of Chrome Scooter will be sold to earn monthly income of $ 11,900.

Working Notes:

Calculation of Sales mix of Standard Scooter = 3 Scooters/ (3 Scooters + 2 Scooters)

                                                                                  = 60%    

Calculation of Sales mix of Chrome Scooter = 2 Scooters/ (3 Scooters + 2 Scooters)

                                                                                = 40%

Calculation of weighted average contribution margin per unit:

	Standard	Chrome	Total
Selling price per unit	$    70.00	$    85.00
Less: Variable expenses per unit	$    55.00	$    65.00
Contribution margin per unit (A)	$    15.00	$    20.00
Sales mix (B)	0.60	0.40
Weighted average contribution margin per unit	$       9.00	$       8.00	$    17.00