1 ucm x sales mix prod 2 ucm x sales mix weighted avg

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Prod. #1 UCM x Sales Mix % + Prod. #2 UCM x Sales Mix % = Weighted Avg. UCM Step 2 : Calculate the break-even point in units: Fixed Cost / Weighted Avg. UCM = Breakeven point in units
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DeGrooteSchool.ca Sales Mix – Breakeven in Units Example Vargo Video Basic Data ° Sells both Blu-ray DVD players and TVs ° Fixed costs of $275,000 ° Sales Mix – Units: DVD 75%, TVs 25%
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DeGrooteSchool.ca Sales Mix – Breakeven in Units Example (cont.) Step 1 : Determine weighted-average unit contribution margin for the sales mix of 75 percent DVDs and 25 percent TVs: Step 2: Determine the break-even point in units:
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DeGrooteSchool.ca Sales Mix – Breakeven in Units Example (cont.) Verify the number of DVDs and TVs to be sold to break-even with a sales mix of 75% DVDs, 25% TVs, and with fixed costs of $200,000: At any level of units sold, operating income will be greater if more high contribution margin units are sold than low contribution margin units.
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DeGrooteSchool.ca Next Class Problem P6-51A Managerial Decision-making Process Marginal or Incremental Analysis Relevant Costs , Opportunity Costs , Sunk Costs Decision Making Contexts
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