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. Lawnmowers Enter a number of units units Weed-trimmers Enter a number of units units Chainsaws Enter a number of units units

Answer 1

Total Break even sales = 154,000 units

Lawnmowers ($154,000 × 20%) = 30,800 Units

Weed-trimmers ($154,000 × 50%) = 77,000 units

Chainsaws ($154,000 × 30%) = 46,200 Units

Explanation:

As per the data given in the question, the computation is shown below:

Weighted contribution margin = Contribution margin × Sales mix

= (0.2 × 30) + (0.5 × $21) + (0.3 × $39)

= $28.2

Now, Total break even sales = Fixed cost ÷ Weighted contribution margin

= $4,342,800 ÷ $28.2

= 154,000 units

So classifications are as follows

Lawnmowers ($154,000 × 20%) = 30,800 Units

Weed-trimmers ($154,000 × 50%) = 77,000 units

Chainsaws ($154,000 × 30%) = 46,200 Units

We simply multiplied the total break even sales with each sales mix