Question

Sales mix and break-even sales Obj. 5Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows: Products Unit Selling Unit Variable Sales Price Cost Mix Laptops $1,600 $800 40% Tablets 850 350 60% The estimated fixed costs for the current year are $2,498,600. Instructions 1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. Answer Check Figure: 4,030 units 2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year. 3. Assume that the sales mix was 50% laptops and 50% tablets. Compare the break-even point with that in part (1). Why is it so different?

Answer 1

Weighted Average Contribution margin per unit
				Laptop	Tablets	Total
Selling price per unit			1600	850
Less: Variable cost per unit		800	350
Contribution margin per unit		800	500
Multiply: Sales mix			40%	60%
Weighted Average contribution margin per unit	320	300	620
Req 1.
Total Break even units:
Total Fixed cost			24,98,600
Divide: Weighted average CM per unit	620
Total Break even units:		4030
Req 2.
Units sales of each product at Break even:
Units sales of Laptop (4030*40%)	1612
Units sales of tablets (4030*60%)	2418
Req 3.
Weighted Average Contribution margin per unit
				Laptop	Tablets	Total
Selling price per unit			1600	850
Less: Variable cost per unit		800	350
Contribution margin per unit		800	500
Multiply: Sales mix			50%	50%
Weighted Average contribution margin per unit	400	250	650
Total Break even units:
Total Fixed cost			24,98,600
Divide: Weighted average CM per unit	650
Total Break even units:		3844
Break even units has been decreased.
This is due to the fact that the % sales of product-Laptop wth higher contribution margin per unit
has been increased.