Multiple-product break even analysis
Florida Favorites Company produces toy alligators and toy dolphins. Fixed costs are $1,290,000 per year. Sales revenue and variable costs per unit are as follow:
Sales Price $20 $25 Variable Costs 8 10
A. Suppose the company currently sells 140,000 alligators per year and 60,000 dolphins per year. Assuming the sales mix stays constant how many alligators and Dolphins must the company sell to break even?
B. Suppose the company currently sells 60,000 alligators per year and 140,000 dolphins per year. Assuming the sales mix stays constant, how many alligators and dolphins must the company sell to break even per year?
C. Explain why the total number of toys needed to break even in (a) is the same as or different from the number in (b).
|Units |140000 |60000 | 200000 | |Sales price per unit |$20 |$25 | | |Variable Cost per unit |$8 |$10 | | | |Alligators |Dolphins |TOTAL | |Sales(A) |$2,800,000 |$1,500,000 |$4,300,000 | |Variable cost(B) |$1,120,000 |$600,000 |$1,720,000 | | | | | | |Contribution Margin (A-B) |$1,680,000 |$900,000 |$2,580,000 | |Less :Fixed cost | | |$1,290,000 | |Net income | | |$1,290,000 |
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