Question

Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small portable gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q expects to sell 20,800 portable grills, 46,800 stationary grills, and 5,200 smokers. Information on the three models is as follows:

Portable Stationary Smokers
Price $86 $199 $253
Variable cost per unit 49 125 136

Total fixed cost is $2,078,310.Required:1. What is the sales mix of portable grills to stationary grills to smokers?2. Compute the break-even quantity of each product.

Answer 1

a.

The sales mix of Portable to Stationary to Smoker is 4 : 9 : 1

b.

Break even in units of each product is:

Portable = 8929

Stationary = 20091

Smoker = 2232

Step-by-step explanation:

1.

First we calculate the total sales of all three units.

The total sales will be = 20800 + 46800 + 5200 = 72800 units

The sales mix:

Let 5200 be equal to 1.

Portable grills = 20800 / 5200 = 4

Stationary Grills = 46800 / 5200 = 9

Smokers = 5200 / 5200 = 1

The sales mix = Portable : Stationary : Smokers

The sales mix = 4 : 9 : 1

The total equals = 4 + 9 + 1 = 14

2.

To compute the break even quantity of each product, we first need to calculate the composite product break even quantity in units and multiply it by the appropriate sales mix of units.

First we calculate the composite contribution per unit.

Composite contribution per unit = 4/14 * (86 - 49) + 9/14 * (199 - 125) + 1/14 * (253 - 136)

Composite contribution per unit = 66.5 per unit

Composite break even point in units = 2078310 / 66.5 = 31252.78 rounded off to 31253 units.

Break even quantity of each product

Portable = 31253 * 4/14 = 8929.42 rounded off to 8929 units

Stationary = 31253 * 9/14 = 20091.21 rounded off to 20091 units

Smokers = 31253 * 1/14 = 2232.35 rounded off to 2232 units