What is the break-even volume in sales dollars at the expected sales mix?

Question

Barney Company produces and sells two models of speakers for use with desktop computers. The following monthly data are provided:

Unit Selling Price - $100 standard $150 premium

Variable manufacturing costs - $60 standard -- $90 premium

Variable selling and administrative costs - $15 standard --- $10 premium

Estimated unit sales per month - $1000 standard --- $2000 premium

Total monthly fixed costs are expected to be $15,000. What is the break-even volume in sales dollars at the expected sales mix?

A) $25,714

B) $45,000

C) $48,000

D) $60,000

Answer 1

Standard speaker has unit CM of ($100 - $75) = $25

Premium speaker has unit CM of ($150 - $100) = $50

The sales mix is 2 to 1 premium vs. standard.

Let x = number of standards sold in the month, then 2x = no. of premiums sold.

To find break-even point, need x*($25) + 2x*($50) = x*($25) + x*($100) = $15,000, or

x = ($15,000 / $125) = 120. This is the no. of standard units sold to break-even.

The no. of premium units sold to break-even is 2x = 240 units.

Break-even in $ = 120*($100) + 240*($150) = $48,000.