The Beetle Manufacturing Company produces the following three products: Hammers Screwdriver Saws Selling price per...
The Beetle Manufacturing Company produces the following three products:
| Hammers | Screwdriver | Saws | |
| Selling price per unit | R40 | R16 | R50 |
| Variable costs per unit | R28 | R12 | R30 |
| Contribution per unit | R12 | R 4 | R20 |
Fixed costs are R76,000 per year.
50% of all sales in units are hammers, 30% are screwdrivers, and
20% are saws.
Required:
Calculate the following values:
A. break-even point in total units.
B. Number of hammers that will be sold at break-even.
C. Total sales in units to obtain a target income of R19,000.
Homework Answers
| Computation of Weighted Average Contribution ratio | ||||
| Hammers | Screwdriver | Saws | Total | |
| Contribution Margin Per Unit (a) | 12 | 4 | 20 | |
| Sales Mix (b) | 50% | 30% | 20% | |
| Weighted Average Contribution (axb) | 6 | 1.2 | 4 | 11.2 |
| a. BEP Unit= Fixed Cost / Weighted Average Contribution per Unit |
| =76000/11.20=6786 Unit |
| b. No. of Hammer to be sold |
| Total BEP Unit= 6786 Unit |
| Ratio of Hammer = 50% |
| No of Unit of Hammer ( 6786X50%)=3393 Unit |
| c. Tales Sales required for target Income |
| Revised Contribution = Fixed Cost + Target Income |
| =76000+19000=95000 |
| Weighted Average Contribution = $11.20 per Unit |
| Total Sales in Units require= 95000/$11.20=8482 Unit |
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