Exercise 19-6 x Your answer is incorrect. Try again Yard Tools manufactures lawn
ID: 2564417 • Letter: E
Question
Exercise 19-6 x Your answer is incorrect. Try again Yard Tools manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and unit contribution margin are as follows Unit Contribution Margin Lawnmowers Weed-trimmers Chainsaws Sales Mix 20 % 50 % 30 % $32 $23 $37 Yard Tools has fixed costs of $4,205,000 Compute the number of units of each product that Yard Tools must sell in order to break even under this product mix. (Use Weighted- Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g 2,510.) Lawnmowers units Weed-trimmers units Chainsaws units LINK TO TEXTExplanation / Answer
Solution:
This problem is related to Break Even under Sales Mix situation where more than one products are sold.
Sales mix ratio is given for each product.
Calculation of Weighted Average Contribution Margin for company
Lawnmowers
Weed trimmers
Chainsaws
Total
Unit Contribution Margin
$32
$23
$37
x Sales Mix Ratio
20.00%
50.00%
30.00%
Weighted Avg Contribution Margin
(Sales mix ration x contribution margin)
$6.40
$11.50
$11.10
$29.00
Break Even Point (in units as a company whole) = Total Fixed Cost / Weighted Avg Contribution Margin
= $4,205,000 / $29
= 145,000 Units
Calculation of Break Even Point under sales mix
Lawnmowers
Weed trimmers
Chainsaws
Break Even Point (in units as a whole for company)
145000
145000
145000
x Sales Mix Ratio
20.00%
50.00%
30.00%
Break Even Point for Salex Mix (for each product)
29000
72500
43500
Break Even Point
Lawnmowers = 29,000 Units
Weed-trimmers = 72,500 Units
Chainsaws = 43,500 Units
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Lawnmowers
Weed trimmers
Chainsaws
Total
Unit Contribution Margin
$32
$23
$37
x Sales Mix Ratio
20.00%
50.00%
30.00%
Weighted Avg Contribution Margin
(Sales mix ration x contribution margin)
$6.40
$11.50
$11.10
$29.00
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