Question

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: Products Unit Selling Price Unit Variable Cost Sales Mix Laptops $1,200 $600 40% Tablets 700 350 60% The estimated fixed costs for the current year are $4,500,000. Required: 1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. fill in the blank 1 units 2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year. Laptops fill in the blank 2 units Tablets fill in the blank 3 units 3. Assume that the sales mix was 60% laptops and 40% tablets. Compare the break-even point with that in part (1). Why is it so different

Answer 1

Answer: See explanation

Explanation:

1. The estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year will be calculated thus:

Selling price per unit will be:

= ($1200 × 40%) + ($700 × 60%)

= 480 + 420

= $900

Variable cost per unit will be:

= ($600 × 40%) + ($350 × 60%)

= 240 + 210

= $450

Contribution margin will then be

= selling price per unit-variable cost

= $900 - $450

= $450

Therefore, the breakeven point in sales units of the overall product will be:

= fixed cost /contribution per unit

= $4,500,000 / $450

= 10000 units

2. The unit sales of both laptops and tablets for the current year will be:

Laptop = 10000 × 40% = 4000

Tablet = 10000 × 60% = 6000

3. Assume that the sales mix was 60% laptops and 40% tablet, the break-even will be:

Selling price per unit will be:

= ($1200 × 60%) + ($700 × 40%)

= 720 + 280

= $1000

Variable cost per unit will be:

= ($600 × 60%) + ($350 × 40%)

= 360 + 140

= $500

Contribution margin will then be

= selling price per unit-variable cost

= $1000 - $500

= $500

Therefore, the breakeven point in sales units of the overall product will be:

= fixed cost /contribution per unit

= $4,500,000 / $500

= 9000 units