Answer:
The question is incomplete. The complete question is given as follows:
Selling Price per unit Variable cost per unit
Product $ $
Snowboards 320.00 170.00
Skis 400.00 225.00
Poles 50.00 20.00
Answer: Snowboard-840 units, Ski- 360 units and Poles-240 units
Explanation:
The break-even point is the activity level where the total cost of a business is the same as its total revenue. At this point, the business makes neither profit nor loss. This analysis helps a firm to know how many clients to be served or units to be produced in order to cover its fixed costs.
A break-even point can be calculated using the following relationships below:
A single-product scenario
Break-even point (in units) = Total general fixed costs/(selling price -Variable cost)
Multiple-products scenario
Break-even point (in units) = Total general fixed costs/ average contribution per unit.
Total general fixed costs are period costs which remain the same within a given activity level, and cannot be said to be incurred for a specific product.
We will use use the second formula, because there are multiple product
Snow Ski Poles
$ $ $
Selling price 320 400 50
Variable cost (170) (225) (20)
Contribution(SP-VC) 150 175 30
Cont. from a mix(cont × unit) 1050 525 60
Average contribution = (1050+525+60)/(7+3+2)
= $136.25
Break-even point (in units) = $196200/$136.25
= 1,440 units.
Salvador will need to sell a total of 1,440 units in following mix to break-even:
Snowboards= (7/12) *× 1,440= 840 units
Skis= (3/12) × 1,440= 360 units
Poles = (2/12) ×1.440= 240 units
