27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Sales mix and break-even sales

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:


The estimated fixed costs for the current year are $2,498,600.


1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year.

2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year.

3. Assume that the sales mix was 50% laptops and 50% tablets. Compare the break-even point with that in part (1). Why is it so different?


To determine

Sales mix: It refers to the relative distribution of the total sales among the number of products sold by a company. In other words, it is expressed as a percentage of units sold for each product with respect to the total units sold for all the products.

Break-even Point: It refers to a point in the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even point, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:

Break-evenpointinSales(units) =FixedCostsContributionMarginperunit

To determine: the break-even point in sales units for the overall Product E for the current year.


Determine the break-even point in sales units for the overall Product E.

Fixed cost =$2,498,600

Contribution margin per unit =$620 per unit (3)

Break-evenpointinSales(units)forProductE] =FixedCostsContributionMarginperunit=$2,498,600$620=4,030units

Working notes:

Note: For break-even analysis, the Product-Laptops and Product-Tablets are considered as the components of one overall company’s Product E.

Determine the selling price per unit of Product E.

SellingpriceperunitofProductE]=(SellingpriceperunitofLaptops×salesmixofLaptops)+(SellingpriceperunitofTablets×salesmixofTablets)=($1,600perunit×40%)+($850perunit×60%)=$640perunit+$510perunit=$1,150perunit (1)

Determine the variable cost per unit of Product E


To determine
the break-even sales (units) for Product-Laptops and Product-Tablets.


To determine

To compare: the break-even point with that in Part (1).

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