Unit 1: Cost-Volume-Profit Analysis Economics Worksheet With Answers - Cma311s Notes, 2010 Page 9
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272.2
Calculate how many more (or fewer) units have to be sold if the sales mix is changed to 50% for each
product.
Individual product break-even points
In Example 3 above the break-even point was 7 000 units for all three products combined. However,
production planning and scheduling require break-even data for individual products. The sales mix used to
calculate the weighted average contribution per unit is now used to extract the individual product break-even
points. Total break-even units are multiplied by the individual sales mix percentages to determine the break-
even point for individual products. The calculation is as follows:
= Individual
= Individual
x Sales
Product B/E
x Selling
Product B/E
Product Total units
mix
in units
price
in N$
A
7 000
0,20
1 400
N$20
N$ 28 000
B
7 000
0,30
2 100
N$50
N$105 000
C
7 000
0,50
3 500
N$40
N$140 000
7 000
N$273 000
Example 4
Flupp Ltd produces 3 products and has fixed costs of N$363 000 per year. Other data for the year is as
follows:
A
B
C
Selling price per unit
N$18
N$12
N$36
Variable cost per unit
N$12
N$7
N$27
Relative sales mix
0,4
0,3
0,3
Required:
4.1
Calculate the break-even point in units for each product individually.
4.2
Determine how many units of each product must be sold to earn a net income of
N$99 000.
Solution to Example 4
Weighted
Product Selling price Variable cost
Contribution Sales mix
contribution
A
N$18
N$12
N$6
0,4
N$2,40
B
N$12
N$ 7
N$5
0,3
N$1,50
C
N$36
N$27
N$9
0,3
N$2,70
Average contribution per unit
N$6,60
Break-even point (in units) = Fixed costs ÷ Average contribution per unit
= N$363 000 ÷ N$6,60
= 55 000 units
Individual break-even sales in units:
A
55 000 x 0,4 = 22 000 units
B
55 000 x 0,3 = 16 500 units
C
55 000 x 0,3 = 16 500 units
55 000 units
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