Perrson Company makes two types of backpacks. Data for the company's activity during a typical month are presented below:
School Hiker
Model Model
Sales units 40,000 40,000
Selling price per unit $6 $18
Variable expense per unit $2 $10
The company's total fixed expenses are $80,000. There are no beginning or ending inventories.
A. What is the per unit contribution margin for each of the two models?
B. What is the break-even point in terms of sales dollars if the sales mix remains constant?
Break-even point (in sales) = Fixed cost * selling price per unit
Contribution margin
C. If the sales mix is changed to 60,000 units of the school model and 20,000 units of the hiker model, what will be the break-even point in terms of sales dollars?