Sales Mix and Break-Even Sales Data related to the expected sales of snowboards

Question

Sales Mix and Break-Even Sales Data related to the expected sales of snowboards and skis for Winter Sports Inc. for the current year, which is typical of recent years, are as follows: Products Unit Selling Price Unit Variable Cost Sales Mix Snowboards $270 $180 30% Skis 540 250 70% The estimated fixed costs for the current year are $1,035,000. Required: 1. Determine the estimated units of sales of the overall (total) product necessary to reach the break-even point for the current year. 1,200,000 units 2. Based on the break-even sales in units in part 1, determine the unit sales of both snowboards and skis for the current year. Snowboards: 480,000 units Skis: 720,000 units 3. Assume that the sales mix was 70% snowboards and 30% skis. Determine the estimated units of sales of the overall product necessary to reach the break-even point for the current year. 1,317,073 units

Explanation / Answer

Answer 1.

Snowboards:

Selling Price = $270
Unit Variable Cost = $180

Unit Contribution Margin = Selling Price - Unit Variable Cost
Unit Contribution Margin = $270 - $180
Unit Contribution Margin = $90

Skis:

Selling Price = $540
Unit Variable Cost = $250

Unit Contribution Margin = Selling Price - Unit Variable Cost
Unit Contribution Margin = $540 - $250
Unit Contribution Margin = $290

Sales Mix = 30% Snowboards and 70% Skis

Company's Unit Contribution Margin = 30% * Snowboards Unit Contribution Margin + 70% * Skis Unit Contribution Margin
Company's Unit Contribution Margin = 30% * $90 + 70% * $290
Company's Unit Contribution Margin = $230

Company's Fixed Costs = $1,035,000

Break-even Point in unit sales = Company's Fixed Costs / Company's Unit Contribution Margin
Break-even Point in unit sales = $1,035,000 / $230
Break-even Point in unit sales = 4,500

Answer 2.

Break-even Point in unit sales = 4,500
Sales Mix = 30% Snowboards and 70% Skis

Unit Sales of Snowboards = 4,500 * 30%
Unit Sales of Snowboards = 1,350

Unit Sales of Skis = 4,500 * 70%
Unit Sales of Skis = 3,150

Answer 3.

Snowboards:

Selling Price = $270
Unit Variable Cost = $180

Unit Contribution Margin = Selling Price - Unit Variable Cost
Unit Contribution Margin = $270 - $180
Unit Contribution Margin = $90

Skis:

Selling Price = $540
Unit Variable Cost = $250

Unit Contribution Margin = Selling Price - Unit Variable Cost
Unit Contribution Margin = $540 - $250
Unit Contribution Margin = $290

Sales Mix = 70% Snowboards and 30% Skis

Company's Unit Contribution Margin = 70% * Snowboards Unit Contribution Margin + 30% * Skis Unit Contribution Margin
Company's Unit Contribution Margin = 70% * $90 + 30% * $290
Company's Unit Contribution Margin = $150

Company's Fixed Costs = $1,035,000

Break-even Point in unit sales = Company's Fixed Costs / Company's Unit Contribution Margin
Break-even Point in unit sales = $1,035,000 / $150
Break-even Point in unit sales = 6,900

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