Sevall Surfware is a company that specializes in selling towels, swimsuits, and

Question

Sevall Surfware is a company that specializes in selling towels, swimsuits, and beach accessories. The sales mix is 5:5:10 (i.e. for every 5 towels sold, 5 swimsuits and 10 beach accessories are sold). Find the break-even point for each product. The company's annual fixed costs are $34,000. Additionally, Sevall wants to achieve an operating profit of $102,000. How many units would it need to sell to achieve a profit of $136K? Selling Price Per Unit Variable Cost Per Unit Towels 20 6 Swimsuits 50 20 Beach Accessories 30 18 Sevall Surfware is a company that specializes in selling towels, swimsuits, and beach accessories. The sales mix is 5:5:10 (i.e. for every 5 towels sold, 5 swimsuits and 10 beach accessories are sold). Find the break-even point for each product. The company's annual fixed costs are $34,000. Additionally, Sevall wants to achieve an operating profit of $102,000. How many units would it need to sell to achieve a profit of $136K? Selling Price Per Unit Variable Cost Per Unit Towels 20 6 Swimsuits 50 20 Beach Accessories 30 18

Explanation / Answer

Weighted average contribution margin:

Hence weighted contribution margin=(14*5/20)+(30*5/20)+(12*10/20)=$17

Hence overall breakeven=(Fixed costs/contribution margin)

=(34000/17)=2000 units

Hence breakeven for:

Towels=(2000*5/20)=500 units

Swimsuits=(2000*5/20)=500 units

Beach Accessories=(2000*10/20)=1000 units.

2.

Target contribuition margin=(Operating profit+Fixed costs)

=(34000+192999)=$136000

Hence units to be sold=($136000/17)=8000 units.

Towels Swimsuits Beach Accessories contribution margin(Selling price-Variable expenses) (20-6)=$14 (50-20)=$30 (30-18)=$12

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