The Freud Company produces engine values for trucks, cars, and motor bikes. The
ID: 2488208 • Letter: T
Question
The Freud Company produces engine values for trucks, cars, and motor bikes. The company currently sells 1,200 truck values at $10.00 each. They have a variable cost of production of $7.00. They sell 1,800 car values for $8.00 and have a variable cost of $6.00. Motor bike values are not as much in demand and they sell 1,000 for $7.00 each and have a variable cost of $5.00. The company has total fixed costs of $10,000.00. How many values must the company sell to breakeven? How many truck values, car values, and motor bike values need to be sold? What is the dollar value of sales that must be made for the company to breakeven?
Explanation / Answer
1
Calculation of Number of values company must sell to breakeven:
Values for Trucks
Values for Cars
Values for Bikes
Total
Sales Price
$ 10.00
$ 8.00
$ 7.00
Less: Variable Cost
$ (7.00)
$ (6.00)
$ (5.00)
Contribution Per Unit (A)
$ 3.00
$ 2.00
$ 2.00
Units
1200
1800
1000
4000
Unit Weights = Units / 4000 = (B)
0.30
0.45
0.25
Weighted Contribution Margin Per unit =(C) = A*B =
$ 0.90
$ 0.90
$ 0.50
$ 2.30
Total Fixed Cost (D)
$ 10,000.00
Number of values company must sell to breakeven = D/C =
4,348
2
Calculation of Number of values company must sell to breakeven for each category :
Values for Trucks
Values for Cars
Values for Bikes
Total
Unit Weights = (A)
0.30
0.45
0.25
Total Number of values company must sell to breakeven =(B) =
4348
4348
4348
Number of values company must sell to breakeven for each category =A*B =
1,304
1,957
1,087
4,348
3
Calculation of dollar value of sales that must be made for the company to breakeven:
Values for Trucks
Values for Cars
Values for Bikes
Total
Number of values company must sell to breakeven for each category =(A)
1,304
1,957
1,087
4,348
Sales Price (B)
$ 10.00
$ 8.00
$ 7.00
Dollar value of sales that must be made for the company to breakeven = A*B =
$ 13,040
$ 15,656
$ 7,609
$ 36,305
1
Calculation of Number of values company must sell to breakeven:
Values for Trucks
Values for Cars
Values for Bikes
Total
Sales Price
$ 10.00
$ 8.00
$ 7.00
Less: Variable Cost
$ (7.00)
$ (6.00)
$ (5.00)
Contribution Per Unit (A)
$ 3.00
$ 2.00
$ 2.00
Units
1200
1800
1000
4000
Unit Weights = Units / 4000 = (B)
0.30
0.45
0.25
Weighted Contribution Margin Per unit =(C) = A*B =
$ 0.90
$ 0.90
$ 0.50
$ 2.30
Total Fixed Cost (D)
$ 10,000.00
Number of values company must sell to breakeven = D/C =
4,348
2
Calculation of Number of values company must sell to breakeven for each category :
Values for Trucks
Values for Cars
Values for Bikes
Total
Unit Weights = (A)
0.30
0.45
0.25
Total Number of values company must sell to breakeven =(B) =
4348
4348
4348
Number of values company must sell to breakeven for each category =A*B =
1,304
1,957
1,087
4,348
3
Calculation of dollar value of sales that must be made for the company to breakeven:
Values for Trucks
Values for Cars
Values for Bikes
Total
Number of values company must sell to breakeven for each category =(A)
1,304
1,957
1,087
4,348
Sales Price (B)
$ 10.00
$ 8.00
$ 7.00
Dollar value of sales that must be made for the company to breakeven = A*B =
$ 13,040
$ 15,656
$ 7,609
$ 36,305
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