Question

Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold. What is the overall sales revenue at break-even?

Answer 1

Answer:

The overall Sales revenue at break even is $515995.872

Explanation:

The overall break even in dollars or the composite break even point is the Total revenue that a business must earn from all its products that should be equal to the total costs from all its products and there is no profit or no loss.

The formula for composite or overall break even in dollars is,

Break even in dollars = Fixed costs / Weighted average contribution margin ratio

Where the weighted average contribution margin ratio is the weghtage of each product in the overall sales mix multiplied by the contribution margin of each product.

The total sales mix is = 8 + 4 + 1  = 13

Weighted average contribution margin ratio = ((360 - 210) / 360) * 8/13  +  

((500 - 300) / 500) * 4/13  +  ((1600 - 600) / 1600) * 1/13     =   0.5814 or 58.14%

Break even in dollars = 300000  /  0.5814  

Break even in dollars = $515995.872

If there is some discrepancy in the final answer, it will be due to the rounding off of the weighted average contribution margin ratio