Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
$\begin{array}{lccc}
& \text { Plane } & \text { Boat } & \text { Total } \
\text { Selling price per unit } & \$ 300 & \$ 100 & \
\text { Variable cost per unit } & \$ 240 & \$ 60 & \
\text { Expected unit sales } & 28,000 & 7,000 & 35,000 \
\text { Sales mix } & 80 \% & 20 \% & 100 \% \
\text { Fixed costs } & & & \$ 1,400,000
\end{array}$

-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
How many units in total must be sold to break even?

Question

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
 $\begin{array}{lccc}
& \text { Plane } & \text { Boat } & \text { Total } \
\text { Selling price per unit } & \$ 300 & \$ 100 & \
\text { Variable cost per unit } & \$ 240 & \$ 60 & \
\text { Expected unit sales } & 28,000 & 7,000 & 35,000 \
\text { Sales mix } & 80 \% & 20 \% & 100 \% \
\text { Fixed costs } & & & \$ 1,400,000
\end{array}$

-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
How many units in total must be sold to break even?

Quizplus · Accepted Answer

The contribution margin per unit is $60 for the plane and $40 for the boat. The weighted-average contribution margin is $56 [($60 x 0.8) + ($40 x 0.2)]. The break-even point in units is $1,400,000/$56 = 25,000 units.

Exhibit 6-4 Sanchez Company Produces Two Different Remote Control Products

Exhibit 6-4
Sanchez Company Produces Two Different Remote Control Products