Question

Eastwick produces and sells three products. Last month's results are as follows: P1 P2 P3 Revenues $100,000 $200,000 $200,000 Variable costs 40,000 140,000 80,000 Product mix 1 2 2 Fixed costs total $200,000. What is Eastwick's break-even sales volume?

Answer 1

Answer:

BEP = 416,666.67

Explanation:

First we add the sales, to get sales mix.

100,000 + 200,000 + 200,000 = 500,000

Then we addthe conrtibution fr CM mix

40,000 + 140,000 + 80,000 = 240,000

to get the CM ratio for the mix we do CM mix / SALES mix

240,000/500,000 = 0.48

We know move to the BEP formula:

$\frac{Fixed\:Cost}{Contribution \:Margin \:Ratio} = Break\: Even\: Point_{dollars}$

$\frac{200,000}{0.48} = Break\: Even\: Point_{dollars}$

BEP = 416,666.67

if we calculate we got:

P1  416,666.67 x 0.2 x .6 = 50,000

P2  416,666.67 x 0.4 x .3 = 50,000

P3  416,666.67 x 0.4 x .6 = 100,000

Total contribution              200,000

Which proved the answer