Answer:
Break-even point (units)= 10,500 clippers
Explanation:
Giving the following information:
The economy clipper costs $5 and has a sales price of $9.
The high-end model costs $9 and sales for $15.
Fixed costs associated with this product line amount to $35,880.
Sales participation:
Economy clippers= 0.70
High-end= 0.30
Desired profit= $12,420
To calculate the number of clippers to be sold for the company, we need to use the following formula:
Break-even point (units)= (Total fixed costs + desired profit) / Weighted average contribution margin ratio
Weighted average contribution margin ratio= (weighted average selling price - weighted average unitary variable cost)
Weighted average contribution margin ratio= (0.7*9 + 0.3*15) - (0.7*5 + 0.3*9)
Weighted average contribution margin ratio= $4.6
Break-even point (units)= (35,880 + 12,420) / 4.6
Break-even point (units)= 10,500 clippers
Answer:
Units to be sold to achieve target profit = 10,500 units
Explanation:
The units to be sold to achieve target profit is determined as follows:
Units to be sold to achieve target profit
= (Fixed cost + Target Profit)/Average contribution per unit
Economy High-end
Contribution per unit = 9-5=$4 15-9 = $6
Average contribution per unit= ($4× 70%) + (30%×$6) = $4.6
Units to be sold to earn a profit of $12,420
= Fixed cost + Target Profit/Average contribution per unit
= (35,880 + 12,420)/4.6
= 10,500 units
Units to be sold to achieve target profit = 10,500 units
