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Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: Product Units Sold Sales Mix 18,064 80% 4,516 20 22,580 100% B Total Assume the following unit selling prices and unit variable costs: Contribution Margin $ 15 40 Product Selling Price Variable Cost $ 67 $ 82 142 102 Fixed costs are $404,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. Required: 1. Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. 2. Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B.

Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: Product Units Sold Sales Mix 18,064 80% 4,516 20 22,580 100% B Total Assume the following unit selling prices and unit variable costs: Contribution Margin $ 15 40 Product Selling Price Variable Cost $ 67 $ 82 142 102 Fixed costs are $404,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. Required: 1. Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. 2. Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B.

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter10: Forecasting Financial Statement
Section: Chapter Questions
Problem 12PC
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Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: Product Units Sold Sales Mix 18,064 80% 4,516 20 22,580 100% B Total Assume the following unit selling prices and unit variable costs: Contribution Margin $15 40 Product Selling Price Variable Cost $ 82 $ 67 102 142 Fixed costs are $404,000 per year Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. Required: 1. Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. 2. Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: Product Units Sold Sales Mix 18,064 80% 4,516 20 22,580 100% B Total Assume the following unit selling prices and unit variable costs: Contribution Margin $15 40 Product Selling Price Variable Cost $ 82 $ 67 102 142 Fixed costs are $404,000 per year Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes. Required: 1. Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. 2. Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. (Round your answer up to the nearest whole number.) Overall break-even point in units Breakeven sales in units for Product A Breakeven sales in units for Product B units units units Overall Breakeven point in dollars Breakeven point in dollars for Product A Breakeven point in dollars for Product B 20,200 16,160 4,040 <Required 1 Required 1 Required 2 Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) 1,895,959 C 1,516,767 379,192 Required 2 > $ $ $ < Required 1 Required 2 > Show less
Transcribed Image Text:Required 1 Required 2 Determine the breakeven point in total units and, for this breakeven point, calculate the number of units of A and B that must be sold. Use the weighted-average contribution margin approach. (Round your answer up to the nearest whole number.) Overall break-even point in units Breakeven sales in units for Product A Breakeven sales in units for Product B units units units Overall Breakeven point in dollars Breakeven point in dollars for Product A Breakeven point in dollars for Product B 20,200 16,160 4,040 <Required 1 Required 1 Required 2 Determine the overall breakeven point in terms of sales dollars based on the weighted-average contribution margin ratio (CMR). (Hint: The weights for calculating the weighted-average CMR are based on relative sales dollars, not units, of the two products.) Break down the total sales dollars breakeven point into sales dollars for product A and sales dollars for product B. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) 1,895,959 C 1,516,767 379,192 Required 2 > $ $ $ < Required 1 Required 2 > Show less
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