Unformatted text preview: margin is the weightedaverage contribution margin of all of its products.
For UDevelop, the weightedaverage 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 UDevelop can be determined from the breakeven
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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 breakeven 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 weightedaverage contribution margin percent. The weightedaverage
contribution margin percent is the ratio of the weightedaverage contribution margin
cor50782_ch01_001072.indd (which is $.26 in our example) divided by the weightedaverage revenue.
1 lan27114_ch03_080109.indd 92 1 10/5/09 11:09:29 PM 10/22/09 10:34:00 PM REVISED PAGES Chapter 3 Fundamentals of CostVolumeProfit Analysis 1 93 To ﬁnd the weightedaverage 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 weightedaverage revenue
can be found as follows:
(.90 $.60) for prints
$.64 (.10 $1.00) for enlargements Orientation Now, the weightedaverage contribution margin percent is found as follows:
$.26 weightedaverage contribution margin
40.625% $.64 weightedaverage revenue The breakeven sales amount in dollars is:
$1,820 ﬁxed costs
$4,480
(You can verify that $4,480 .40625 weightedaverage 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 UDevelop 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 breakeven volume for UDevelop?
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
breakeven point is 6,250 prints. But 6,250 prints cannot be developed wit...
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 Spring '07
 MEJIAS
 Contribution Margin, CVP analysis

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