Garcia Sports, Inc., produces high-quality sports equipment. The company’s Golf Division manufactures three lines of golf clubs—the Standard, the Deluxe, and the Pro—that are widely used in amateur play. Selected information on the golf clubs is given below: Standard Deluxe Pro Selling price per set $200.00 $400.00 $600.00 Variable expenses per set: Production $100.00 $250.00 $350.00 Selling (5% of selling price) $ 10.00 $ 20.00 $ 30.00 All sales are made through the company’s own retail outlets. The Golf Division has the following monthly fixed costs: Fixed production costs $200,000 Advertising expense 125,000 Administrative salaries 275,000 Total $600,000 Sales of the three golf club sets are in the proportion of 5 to 3 to 2, Standard, Deluxe, and Pro, respectively. Required: Determine the breakeven point in units for each of the three golf club sets. Determine the operating income if a total of 60,000 golf club sets are sold in the sales mix proportion.
Garcia Sports, Inc., produces high-quality sports equipment. The company’s Golf Division manufactures three lines of golf clubs—the Standard, the Deluxe, and the Pro—that are widely used in amateur play. Selected information on the golf clubs is given below:
Standard Deluxe Pro
Selling price per set $200.00 $400.00 $600.00
Variable expenses per set:
Production $100.00 $250.00 $350.00
Selling (5% of selling price) $ 10.00 $ 20.00 $ 30.00
All sales are made through the company’s own retail outlets. The Golf Division has the following monthly fixed costs:
Fixed production costs $200,000
Advertising expense 125,000
Administrative salaries 275,000
Total $600,000
Sales of the three golf club sets are in the proportion of 5 to 3 to 2, Standard, Deluxe, and Pro, respectively.
Required:
- Determine the breakeven point in units for each of the three golf club sets.
- Determine the operating income if a total of 60,000 golf club sets are sold in the sales mix proportion.
Lets understand the basics.
Break even point is a point at which fixed cost equals to contribution of the company. It is a point at which no profit no loss condition arise.
Break even point (In units) = Fixed cost/Contribution per unit
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