Glacial Springs produces and sells water filtration systems for homeowners. Info

ID: 2361027 • Letter: G

Question

Glacial Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below.

Basic Basic Plus Premium Total
Units sold 855 405 240 1,500
Selling price $274 $397 $803
Variable cost $191 $272 $422

The company's total fixed costs to produce the filtration systems are $184,626.

Determine the sales mix as a function of units sold for the three products.

Basic %
Basic Plus %
Premium %

Determine the weighted-average unit contribution margin. (Round answer to 2 decimal places, e.g. 10.50.)

$

Determine the total number of units that the company must produce to break even. units
(Use the rounded amount from the previous question when calculating the answer for this question. Round the answer to 0 decimal places, e.g. 125.)

Determine the number of units of each model that the company must produce to break even.
Basic units
Basic Plus units
Premium units

Explanation / Answer

Determine the sales mix as a function of units sold for the three products.

Basic: 855/1500 = .57, basic plus 405/1500 = .27, premium 240/1500 = .16

Answer:
Basic 57%
Basic Plus 27%
Premium 16%

Determine the weighted-average unit contribution margin. (Round answer to 2 decimal places, e.g. 10.50.)

Selling Price (SP)

Variable Costs (VC)

Contribution Margin (CM = SP-VC)

CM * %

Basic

274

191

57%

47.31

Basic plus

397

272

125

27%

33.75

Premium

803

422

381

16%

60.96

Total

142.02

Answer: Weighted average unit contribution margin = $142.02

Determine the total number of units that the company must produce to break even. units
(Use the rounded amount from the previous question when calculating the answer for this question. Round the answer to 0 decimal places, e.g. 125.)

Fixed costs/weighted-average contribution margin = $184,626/142.02 = 1300 units

Answer: 1300 units

Determine the number of units of each model that the company must produce to break even.

Basic units 1300*.57 = 741 units
Basic Plus units 1300*.27 = 351 units
Premium units 1300 *.16 = 208 units

Answer: Basic 741 units, basic plus 351 units, premium 208 units