Clipper Company sells two types of nail clippers. One focuses on the economy ori
ID: 2467821 • Letter: C
Question
Clipper Company sells two types of nail clippers. One focuses on the economy oriented customer and the other aims to satisfy the high-end clientele. The economy clipper costs $5 and has a sales price of $9. The high-end model costs $9 and sales for $15. Fixed costs associated with this product line amount to $35,880. Economy clippers constitute 70 percent of the market with the remaining 30 percent being high-end clippers. Based on this information what is the break-even point for the high-end clippers?
Explanation / Answer
EconomyHigh-end
Sales price$ 9$ 15
Variable cost59
Contribution margin per unit$ 4$ 6
Times sales mixx .70X. 30
Proportionate share of mix$ 2.80$ 1.80
Weighted average contribution margin per unit ($2.80 + $1.80) = $4.60
Total break-even point = Fixed cost ÷ Weighted average contribution margin per unit
Total break-even point = $35,880 ÷ $4.60 = 7,800
total clippersEconomy clipper break-even point = 7,800 total x .70 = 5,460 clippers
High-end clipper break-even point = 7,800 total x .30 =2,340 clippers
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