Question

Tanaka Company manufactures two products. The budgeted per-unit contribution margin for each product follows:

Super Supreme
Sales price $90 $129
Variable cost per unit (69) (75)
Contribution margin per unit $21 $54

Fanning expects to incur annual fixed costs of $132,870. The relative sales mix of the products is 70 percent for Super and 30 percent for Supreme.

Required:
a. Determine the total number of products (units of Super and Supreme combined) Tanaka must sell to break even.
b. How many units each of Super and Supreme must Tanaka sell to break even? (Do not round intermediate calculations.)

Answer 1

A. 4,300 units

B.Units of super =3,010 Units

Units of Spreme =1,290 Units

Step-by-step explanation:

a) Calculation to Determine the total number of products (units of Super and Supreme combined) Tanaka must sell to break even.

First step is to calculate the Contribution margin per sales mix

Contribution margin per sales mix = (0.70*$21) + (0.30*$54)

Contribution margin per sales mix = $14.7+$16.2

Contribution margin per sales mix =$30.9

Now let calculate the Break-even Point In Unit using this formula

Break-even Point In Unit = Fixed Cost/

Contribution Margin Per Sales Mix

Let plug in the formula

Break-even Point In Unit= $132,870/$30.9

Break-even Point In Unit=4,300 units

Therefore the Break-even Point In Unit will be 4,300 units

b) Calculation to determine How many units each of Super and Supreme must Tanaka sell to break even

Units of super = 4,300 units *70%

Units of super =3,010 Units

Units of Spreme =3,660 units *30%

Units of Spreme =1,290 Units

Therefore How many units each of Super and Supreme must Tanaka sell to break even will be:

Units of super =3,010 Units

Units of Spreme =1,290 Units