Question

Sales Mix and Break-Even Sales

Data 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 Price		Unit Variable Cost		Sales Mix
Laptops	$1,600		$800		40%
Tablets	900		450		60%

The estimated fixed costs for the current year are $3,894,000.

Required:

1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year.
______ 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.

Laptops	____units
Tablets	_____units

3. Assume that the sales mix was 60% laptops and 40% tablets. Compare the breakeven point with that in part (1). Why is it so different?
_____units

Answer 1

1
Weighted average unit contribution margin	590		=(1600-800)*40%+(900-450)*60%
Break-even point for the current year	6600	units	=3894000/590
2
Laptops	2640	units	=6600*40%
Tablets	3960	units	=6600*60%
3
Weighted average unit contribution margin	660		=(1600-800)*60%+(900-450)*40%
Break-even point for the current year	5900	units	=3894000/660
The break-even point is lower in this scenario than in part (1) because the sales mix is weighted more heavily toward the product with the higher contribution margin per unit of product.