On-the-Go, Inc, produces two models of travelling cases for laptop computers: the programmer and...

Question:

On-the-Go, Inc, produces two models of travelling cases for laptop computers: the programmer and the Executive. The bags the following characteristics:

ProgrammerExecutive
Selling price per bag$60$100
Variable cost per bag$20$40
Expected sales (bags) per year8,00012,000

The total fixed costs per year for the company are $666,000.

a. What is the anticipated level of profits for the expected sales volume?

b. Assuming that the product mix is the same at the break-even point, compute the break-even point in units. (Round your final answer up to the nearest whole unit.)

Calculate Break-Even for Multiple Product Mix

Calculating the break-even point in terms of the number of units in a product mix requires more calculations than the simple, one-product break-even point calculations require. First, the proportion of the sales mix between the multiple products must be determined, and it must be assumed that mix will remain constant in the future. Next, the individual contribution margin for each product must be known or determinable, which then leads to a calculation of the weighted average contribution margin per unit for the multiple products, combined. Then, the total number of units to break-even is determined using fixed costs, and that total number of units is then allocated to the multiple products based upon the sales mix assumed at the start of the calculation.

Answer and Explanation: 1

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a. What is the anticipated level of profits for the expected sales volume?


The total contribution margin for the Programmer bags will be 8,000 bags...

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Contribution Margin: Definition & Formula

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Chapter 22 / Lesson 20
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Understand what the contribution margin is. Learn the definition of contribution margin and understand its importance in business. Discover how to calculate it through examples.


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