Question

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical ...


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 $230             $160             30%      
Tablets 480             230             70%      

The estimated fixed costs for the current year are $729,120.

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 units
Tablets: fill in the blank units

3. Assume that the sales mix was 70% laptops and 30% tablets. Determine the estimated units of sales of the overall product necessary to reach the break-even point for the current year.
fill in the blank 4 units

Why is it so different?

The break-even point is fill in the blank in this scenario than in part (1) because the sales mix is weighted fill in the blank heavily toward the product with the fill in the blank contribution margin per unit of product.

Answer

Break-Even Point: The breakeven point for a product is the point at which the total expenses (whether it is variable or fixed) of production equal the revenues. When the market price of an asset equals its initial cost, it is considered to have reached the breakeven point in investment.

Particulars Workings Amount ($)
Sales per Unit ( $ 230 * 30% ) + (70% * $ 480) 405
Less: Variable Cost ( $ 160 * 30% ) + (70% * $ 230) (209)
Contribution Per Unit   196
     
Break-Even Sales (In Units) Fixed Cost / Contribution per unit  
  ( $ 729,120 / $ 196 ) 3,720 Units
     

Laptop = 3720 * 30% = 1,116 Units

Tablets = 3,720 * 70% = 2,604 units

Particulars Workings Amount ($)
Sales per Unit ( $ 230 * 70% ) + (30% * $ 480) 305
Less: Variable Cost ( $ 160 * 70% ) + (30% * $ 230) (181)
Contribution Per Unit   124
     
Break-Even Sales (In Units) Fixed Cost / Contribution per unit  
  ( $ 729,120 / $ 124 ) 5,880 Units
     

The break-even point is 3,720 units in this scenario than in part (1) because the sales mix is weighted 30% and 70% of laptops & tablets respectively heavily toward the product with the $ 196 contribution margin per unit of product.

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