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 18,320 80% B 4,580 20 Total 22,900 100% Assume the following unit selling prices and unit variable costs: Product Selling Price Variable Cost Contribution Margin A $ 90 $ 75 $ 15 B 150 110 40 Fixed costs are $420,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. --Assume the original facts except that now fixed costs are expected to be $42,000 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?
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 | 18,320 | 80% |
| B | 4,580 | 20 |
| Total | 22,900 | 100% |
Assume the following unit selling prices and unit variable costs:
| Product | Selling Price | Variable Cost | Contribution Margin |
|---|---|---|---|
| A | $ 90 | $ 75 | $ 15 |
| B | 150 | 110 | 40 |
Fixed costs are $420,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes.
--Assume the original facts except that now fixed costs are expected to be $42,000 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?
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