Hooper Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. The company records show the following monthly data relating to these two products: The company's total monthly fixed cost is $15,000.
-The break-even in sales dollars for the expected sales mix is closest to:

Question

Hooper Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. The company records show the following monthly data relating to these two products:  The company's total monthly fixed cost is $15,000.
-The break-even in sales dollars for the expected sales mix is closest to:

Quizplus · Accepted Answer

To calculate the break-even in sales dollars for the expected sales mix, we need to first find the contribution margin per unit for each product:

Standard: Selling price - variable cost per unit = $300 - $150 = $150
Deluxe: Selling price - variable cost per unit = $450 - $225 = $225

Next, we need to determine the expected sales mix by calculating the weighted average contribution margin per unit:

Expected sales mix = (number of Standard units sold × contribution margin per unit) + (number of Deluxe units sold × contribution margin per unit) ÷ total number of units sold

Plugging in the numbers from the table, we get:

Expected sales mix = (1200 × $150) + (400 × $225) ÷ 1600 = $165,000 ÷ 1600 = $103.125

This means that for every unit sold, we can expect to make $103.125 in contribution margin. To find the break-even point in sales dollars, we divide the total fixed cost by the contribution margin ratio:

Break-even point in sales dollars = Total fixed cost ÷ Contribution margin ratio

Contribution margin ratio = Total contribution margin ÷ Total sales = (($150 × 1200) + ($225 × 400)) ÷ ($300 × 1200) + ($450 × 400) = $246,000 ÷ $540,000 = 0.455

Break-even point in sales dollars = $15,000 ÷ 0.455 = $32,967.03

However, this is the break-even point for 100% Deluxe vacuum cleaners. To find the break-even point for the expected sales mix, we need to adjust the sales dollars by the expected sales mix percentage:

Break-even point in sales dollars for expected sales mix = Break-even point in sales dollars ÷ Expected sales mix percentage

Plugging in the numbers, we get:

Break-even point in sales dollars for expected sales mix = $32,967.03 ÷ 0.65 = $50,718.50

Therefore, the closest answer is C) $109,091.

Hooper Corporation Produces and Sells Two Models of Vacuum Cleaners