Breakeven point for two products: Breakeven point is the level of output at which the sales is equal to the total cost and there is no profit or loss. Breakeven point in units for two products together is calculated with the help of following formulas: B r e a k e v e n p o i n t ( U n i t s ) = T o t a l F i x e d C o s t W e i g h t e d A v e r a g e C o n t r i b u t i o n M a r g i n Target sales: Target sale is sale beyond the breakeven level to earn a desired profit. Target sale for two products together is calculated with the help of following formulas: Target Sale ( Units ) = (Total Fixed Cost + Desired Profit) Weighted Average Contribution Margin Weighted Average Contribution Margin: Weighted Average Contribution Margin is calculated for two products with the help of following formula: W e i g h t e d A v e r a g e C o n t r i b u t i o n M a r g i n = ( C o n t r i b u t i o n m a r g i n o f P r o d u c t A * W e i g h t o f p r o d u c t A ) + ( C o n t r i b u t i o n m a r g i n o f P r o d u c t B * W e i g h t o f p r o d u c t B ) Contribution margin: Contribution margin is the difference between sales price and variable costs. It is calculated with the help of following formula : C o n t r i b u t i o n M a r g i n = S a l e s p r i c e – V a r i a b l e c o s t s 1. To determine: Number of each type of scooters to be sold for breakeven

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Chapter 21, Problem E21.45E

To determine

Concept Introduction:

Breakeven point for two products: Breakeven point is the level of output at which the sales is equal to the total cost and there is no profit or loss. Breakeven point in units for two products together is calculated with the help of following formulas:

$B r e a k e v e n p o i n t (U n i t s) = \frac{T o t a l F i x e d C o s t}{W e i g h t e d A v e r a g e C o n t r i b u t i o n M a r g i n}$

Target sales: Target sale is sale beyond the breakeven level to earn a desired profit. Target sale for two products together is calculated with the help of following formulas:

$Target Sale (Units) = \frac{(Total Fixed Cost + Desired Profit)}{Weighted Average Contribution Margin}$

Weighted Average Contribution Margin: Weighted Average Contribution Margin is calculated for two products with the help of following formula:

$\begin{array}{l} W e i g h t e d A v e r a g e C o n t r i b u t i o n M a r g i n = (C o n t r i b u t i o n m a r g i n o f P r o d u c t A * W e i g h t o f p r o d u c t A) \\ + (C o n t r i b u t i o n m a r g i n o f P r o d u c t B * W e i g h t o f p r o d u c t B) \end{array}$

Contribution margin: Contribution margin is the difference between sales price and variable costs. It is calculated with the help of following formula:

$C o n t r i b u t i o n M a r g i n = S a l e s p r i c e - V a r i a b l e c o s t s$

1. To determine: Number of each type of scooters to be sold for breakeven

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