Question

Yard Tools manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and unit contribution margin are as follows.

Sales Mix Unit Contribution Margin
Lawnmowers 20% $30
Weed-trimmers 50% $21
Chainsaws 30% $39
Yard Tools has fixed costs of $4,342,800. Compute the number of units of each product that Yard Tools must sell in order to break even under this product mix.

Answer 1

Results are below.

Step-by-step explanation:

Sales Mix Unit Contribution Margin

Lawnmowers 20% $30

Weed-trimmers 50% $21

Chainsaws 30% $39

Fixed cosst= $4,342,800

First, we need to calculate the weighted average contribution margin:

weighted average contribution margin= (0.2*30) + (0.5*21) + (0.3*39)

weighted average contribution margin= $28.2

Now, the break-even point in units for the whole company:

Break-even point (units)= Total fixed costs / Weighted average contribution margin

Break-even point (units)= 4,342,800 / 28.2

Break-even point (units)= 154,000

Now, for each product:

Lawnmowers= 0.20*154,000= 30,800

Weed-trimmers= 0.50*154,000= 77,000

Chainsaws= 0.30*154,000= 46,200