Question:
Smith Company can produce two types of carpet cleaners, Brighter and Cleaner. Data on these two products are as follows:
|
Brighter
|
Cleaner
|
|
Sales volume in units
|
400
|
600
|
|
Unit sales price
|
750
|
1000
|
|
Unit variable cost
|
300
|
450
|
The number of machine-hours to produce one unit of Brighter is 1 while the number of machine-hours for each unit of Cleaner is 2. Total fixed costs for the manufacture of both products are 264,000.
Questions
1. Determine the breakeven point in total units for Smith Comapny, based on the assumption that the sales mix(on the basis of relative sales vloume in units) stays constant. Use the weighted average margin approach.
2. At this breakeven level, how many units of each product are envisioned?
3. What is the overall breakeven point in sales dollars?(Use both an indirect apporach, based on your answer to Question 2, and a direct approach, based on the weighted-average contribution margin ratio and the assumption that sales mix based on relative sales dollars stays constant.)
4. Of what potential mangerial value is the information related to machine-hour consumption of the two products?