Green Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder
ID: 2389765 • Letter: G
Question
Green Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data.Shoes Gloves Rang-Finder
Unit sales price $102 $33 $241
Unit variable costs 59 11 201
Unit contribution margin $43 $22 $40
Sales mix 32% 42% 26%
Fixed costs are $626,500.
A) Compute the break-even point in units for the company. (Round computation for weighted-average contribution margin to 2 decimal places, e.g. 31.50 and final answer to 0 decimal places, e.g. 21,500.)
B) Determine the number of units to be sold at the break-even point for each product line. (Round answers to 0 decimal places, e.g. 5,000.)
Shoes ______?
Gloves _______?
Range finders ____?
Explanation / Answer
Soln : Step 1: Calculate the contribution margin per unit for each product: Cont pu of Shoe = SP pu - VC pu = 43 Cont pu of Gloves = 22 Cont Pu of Range finder = 40 Step 2: Calculate the weighted-average contribution margin per unit for the sales mix using the following formula: Shoe CM per Unit × Shoe Sales Mix Percentage + Glove CM per Unit ×Glove Sales Mix Percentage + Range CM per Unit × Range Sales Mix Percentage = Weighted Average Unit Contribution Margin Product Shoe Glove RangeF Contribution Margin per Unit $43 $22 $40 × Sales Mix Percentage 32% 42% 26% Product $13.76 $9.24 $10.40 Sum: Weighted Average CM per Unit $33.40 Step 3: Calculate total units of sales mix required to break-even using the formula: Break-even Point in Units of Sales Mix = Total Fixed Cost ÷ Weighted Average CM per Unit Total Fixed Cost $626,500 ÷ Weighted Average CM per Unit $33.40 Break-even Point in Units of Sales Mix = 18,758 ................Ans (a) Step 4: Calculate number units of product Shoe, Gloves & RangeF at break-even point: Product Shoe Glove RangeF Sales Mix Percentage 32% 42% 26% × Total Break-even Units 18,758 ----------------------------------------------- Product Units at Break-even Point 6,003 7,878 4,877 ..............Ans (b)
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