Data related to the expected sales of laptops and tablets for Tech Products Inc.
ID: 2426167 • Letter: D
Question
Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows: The estimated fixed costs for the current year are $2,498,600. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year. Assume that the sales mix was 50% laptops and 50% tablets. Compare the break-even point with that in part (1). Why is it so different?Explanation / Answer
Let us compute unit contribution of both Laptop and Tablet each one together
Sales : ($1,600 × 40%) + ($850 × 60%) = $1,150
Less: Variable cost ($800× 40%) + ($350× 60%) = $530
Unit contribution margin = $1150 – 530 = $620
Break-even sales = Fixed Costs / Unit Contribution Margin
1.Total Product break even sales in units
$2,498,600 / 620 = 4,030 units
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2. Break even sales in units Both Laptop and Tablet
Laptop (4030 x 40%) =1612 units
Tablet:(4,030 x 60%) =2,418 units
Let us compute unit contribution of both Laptop and Tablet each one together
Sales : ($1,600 × 50%) + ($850 × 50%) = $1,225
Less: Variable cost ($800× 50%) + ($350× 50%) = $575
Unit contribution margin = $1,225 – 575 = $650
Break-even sales = Fixed Costs / Unit Contribution Margin
1.Total Product break even sales in units
$2,498,600 / 650 = 3,844 units
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2. Break even sales in units Both Laptop and Tablet
Laptop (3,844 x 50%) =1,922 units
Tablet:(3,844 x 50%) =1,922 units
Break even changed due change sales mix which in turn changed the contribution
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