Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: Product Units Sold Sales Mix A B Total 18,192 4,548 22,740 Product A B Assume the following unit selling prices and unit variable costs: Contribution Margin $15 40 80% 20 100% Selling Price Variable Cost $71 106 $86 146 Fixed costs are $412,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. Required: 1. Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. 3. Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B. 5. Assume the original facts except that now fixed costs are expected to be $41,200 higher than originally planned. How does this expected increase in fixed costs affect the breakeven point in units? How does the percentage change in the breakeven point compare to the percentage increase in fixed costs? Complete this question by entering your answers in the tabs below. Required 1 Required 3. Required 5 Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. (Round your answer up to the nearest whole number.) Overall break-even point in units Breakeven sales in units for Product A Breakeven sales in units for Product B units units units

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and
the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among
various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows:
Product Units Sold Sales Mix
A
18, 192
B
4,548
Total
22,740
Assume the following unit selling prices and unit variable costs:
Contribution
Margin
$15
40
Product
A
B
80%
20
100%
Selling Price Variable Cost
$71
106
$86
146
Fixed costs are $412,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales
volume changes.
Required:
1. Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be
sold. Use the weighted-average contribution margin approach.
3. Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR).
(Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break
down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B.
5. Assume the original facts except that now fixed costs are expected to be $41,200 higher than originally planned. How does this
expected increase in fixed costs affect the breakeven point in units? How does the percentage change in the breakeven point
compare to the percentage increase in fixed costs?
Complete this question by entering your answers in the tabs below.
Required 1 Required 3 Required 5
Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must
be sold. Use the weighted-average contribution margin approach. (Round your answer up to the nearest whole number.)
Overall break-even point in units
Breakeven sales in units for Product A
Breakeven sales in units for Product B
units
units
units
Transcribed Image Text:7 Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: Product Units Sold Sales Mix A 18, 192 B 4,548 Total 22,740 Assume the following unit selling prices and unit variable costs: Contribution Margin $15 40 Product A B 80% 20 100% Selling Price Variable Cost $71 106 $86 146 Fixed costs are $412,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. Required: 1. Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. 3. Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B. 5. Assume the original facts except that now fixed costs are expected to be $41,200 higher than originally planned. How does this expected increase in fixed costs affect the breakeven point in units? How does the percentage change in the breakeven point compare to the percentage increase in fixed costs? Complete this question by entering your answers in the tabs below. Required 1 Required 3 Required 5 Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. (Round your answer up to the nearest whole number.) Overall break-even point in units Breakeven sales in units for Product A Breakeven sales in units for Product B units units units
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