Practicing Success
Toy craft produces toy alligators and toy dolphins. Fixed costs are Rs1,290,000 per year. Sales revenue and variable costs per unit are as follow:
Suppose the company currently sells 140,000 alligators per year and 60,000 dolphins per year (Sales Mix Percentage 14:6). Assuming the sales mix stays constant, answer the following question. |
How many alligators and Dolphins must the company sell to break even? |
70,000 Units of Alligators and 30,000 units of dolphin 30,000 Units of Alligators and 70,000 units of dolphin 36,000 Units of Alligators and 15,000 units of dolphin 1,40,000 Units of Alligators and 60,000 units of dolphin |
70,000 Units of Alligators and 30,000 units of dolphin |
Weighted Average Contribution Margin= Total Contribution/ Total Units 25,80,000/2,00,000=Rs 12.90 Break Even Point= Fixed Cost/Weighted Average Contribution =12,90,000/12.90=1,00,000 Units Allocating total units to each products based on Expected Units Proportion=14:6 Alligators to be produced for breakeven= 1,00,000*14/20=70,000 Units Dolphins to be produced for breakeven=1,00,000*6/20=30,000 Units So toy crafts has to produce 70,000 toy alligators and 30,000 toy dolphins for breakeven. |