Practicing Success
Toy craft produces toy alligators and toy dolphins. Fixed costs are Rs 1,290,000 per year. Sales revenue and variable costs per unit are as follow:
Suppose the company currently sells 60,000 alligators per year and 140,000 dolphins per year (Sales mix percentage 6:14). Assuming the sales mix stays constant, answer the following question. |
How many alligators and dolphins must the company sell to "break even" per year? |
27446 toy alligators and 64042 toy dolphins 64042 toy alligators and 27446 toy dolphins 70000 toy alligators and 30000 toy dolphins 30000 toy alligators and 70000 toy dolphins |
70000 toy alligators and 30000 toy dolphins |
Weighted Average Contribution Margin= Total Contribution/ Total Units 28,20,000/2,00,000=Rs 14.10 Break Even Point= Fixed Cost/Weighted Average Contribution =12,90,000/14.10=91,489 Units Allocating total units to each products based on Expected Units Proportion=6:14 Alligators to be produced for breakeven= 91,489*6/20=27446 Units Dolphins to be produced for breakeven=91,489*14/20=64,042 Units So the company has to produce 27446 toy alligators and 64042 toy dolphins for breakeven. |