Question 2 Sunland, Inc., sells two types of water pitchers, plastic and glass.

Question

Question 2 Sunland, Inc., sells two types of water pitchers, plastic and glass. Plastic pitchers cost the company $16 and are sold for $31. Glass pitchers cost $25 and are sold for $46. All other costs are fixed at $1,572,480 per year. Current sales plans call for 22,400 plastic pitchers and 67,200 glass pitchers to be sold in the coming year. How many pitchers of each type must be sold to break even in the coming year? (Use contribution margin per unit to calculate breakeven units.) Plastic pitchers Glass pitchers Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Solution a:

Ratio of planned sales of plastick pitchers and Glass pitchers =22400 : 67200 = 1:3

Breakeven sales units = Fixed costs / Contribution margin per unit

= $1,572,480 / $19.50 = 80640 units

Nos of Plastic pitchers to be sold to breakeven = 80640 * 1/4 = 20160 units

Nos of Glass pitchers to be sold to breakeven = 80640 * 2/4 = 60480 units

Computation of weighted average contribution margin per unit Particualrs Plastic Pitchers Glass Pitchers Total Selling price per unit $31.00 $46.00 Variable cost per unit $16.00 $25.00 Contribution margin per unit $15.00 $21.00 Sales Mix 25% 75% Weighted average contribution per unit $3.75 $15.75 $19.50

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