26 7000 units of service see pages 000 to 000 of the

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Unformatted text preview: margin is the weighted-average contribution margin of all of its products. For U-Develop, the weighted-average contribution margin per unit can be computed by multiplying each product’s proportion by its contribution margin per unit (.90 $.24) (.10 $.44) $.26 The multiple product breakeven for U-Develop can be determined from the break-even ✓ Related Resources formula: X $1,820 $.26 7,000 units of service See pages 000 to 000 of the Annotated Instructor’s Edition for general suggestions related to the chapters that Uin Part One. where X refers to the break-even number. The product mix assumption means Develop must sell 6,300 ( .90 7,000) prints and 700 ( .10 7,000) enlargements to break even. Find Breakeven in Sales Dollars To find the breakeven in sales dollars, divide the fixed costs by the weighted-average contribution margin percent. The weighted-average contribution margin percent is the ratio of the weighted-average contribution margin cor50782_ch01_001-072.indd (which is $.26 in our example) divided by the weighted-average revenue. 1 lan27114_ch03_080-109.indd 92 1 10/5/09 11:09:29 PM 10/22/09 10:34:00 PM REVISED PAGES Chapter 3 Fundamentals of Cost-Volume-Profit Analysis 1 93 To find the weighted-average revenue, multiply the proportion of sales (90 percent P A Prints prints and 10 percent enlargements) by the sales prices per unit. R T sell for $.60 per unit and enlargements sell for $1.00 per unit. Therefore, the weighted-average revenue can be found as follows: (.90 $.60) for prints $.64 (.10 $1.00) for enlargements Orientation Now, the weighted-average contribution margin percent is found as follows: $.26 weighted-average contribution margin 40.625% $.64 weighted-average revenue The break-even sales amount in dollars is: $1,820 fixed costs $4,480 (You can verify that $4,480 .40625 weighted-average contribution margin and Organizing Preparing percent $.64 7,000 units.) Yourself for Success in College Alternative Cost Structures The cost structures we have considered so far have been relatively simple. We have separated costs into fixed and variable and we have assumed that the variable cost per unit is the same for all levels of volume. In Chapter 2, we defined other cost behavior patterns, including semivariable costs and step costs. We illustrate how more complicated cost structures can be analyzed by assuming that the fixed costs of U-Develop include the rental of equipment for photo developing and that the capacity of these machines is limited. Suppose, for example, that the fixed costs of $1,500 (from Exhibit 3.1) are sufficient for monthly volumes less H A P orEequal I N P A R T O N C than T RS to 5,000 prints. For every additional 5,000 prints, another machine, renting monthly for $480, is required. Now what is the break-even volume for U-Develop? We know from our analysis earlier in the chapter that 1 a fiaking Yourself Successful in College for M xed cost of $1,500, the break-even point is 6,250 prints. But 6,250 prints cannot be developed wit...
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This note was uploaded on 02/07/2014 for the course MIS 304 taught by Professor Mejias during the Spring '07 term at University of Arizona- Tucson.

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