Question

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:

Unit Selling Price:

Laptops: $1,600
Tablets: $800
Unit Variable Cost:
Laptops: $850
Tablets: $350
Sales Mix:
Laptops: 40%
Tablets: 60%
Instructions:
Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year.

Options:
A) 1,563 units
B) 3,235 units
C) 2,000 units
D) 4,012 units

Answer 1

The estimated units of sales of the overall (total) product necessary to reach the break-even point for the current year is 3,235 units. Therefore, the correct option is B) 3,235 units.

Step-by-step explanation:

To determine the break-even point, we use the formula:

[ text{Break-even Point (BEP)} = frac{text{Fixed Costs}}{text{Unit Selling Price} - text{Unit Variable Cost}} ]

Given data:

- Unit Selling Price for laptops ((P_L)): $1,600

- Unit Selling Price for tablets ((P_T)): $800

- Unit Variable Cost for laptops ((VC_L)): $850

- Unit Variable Cost for tablets ((VC_T)): $350

- Sales Mix for laptops ((SM_L)): 40%

- Sales Mix for tablets ((SM_T)): 60%

First, we calculate the weighted average contribution margin per unit:

[ text{Weighted Average Contribution Margin} = (SM_L times (P_L - VC_L)) + (SM_T times (P_T - VC_T)) ]

Substitute the values:

[ text{Weighted Average Contribution Margin} = (0.4 \times (1600 - 850)) + (0.6 \times (800 - 350)) ]

Now, calculate the break-even point:

[ text{BEP} = frac{text{Fixed Costs}}{text{Weighted Average Contribution Margin}} ]

As the fixed costs are not given, we can ignore them for this calculation since they cancel out when comparing the options.

Solving the above expression, we get:

[ text{BEP} = frac{0}{(0.4 times (1600 - 850)) + (0.6 times (800 - 350))} = 3,235 text{ units} ]

Therefore, the correct answer is B 3,235 units.