Snow Cap Springs produces and sells water filtration systems for homeowners. Inf

Question

Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below.
The company’s total fixed costs to produce the filtration systems are $184,275.

Do It! Review 20-2 Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below Basic Basic Plus Premium Total Units sold Selling price Variable cost 720 $249 $190 300 $402 $288 1801,200 $804 $411 The company's total fixed costs to produce the filtration systems are $184,275 Determine the sales mix as a function of units sold for the three products. (Round answers to 0 decimal places, e.g. 12.) Basic Basic Plus Premium The sales mix as a function of units sold LINK TO TEXT Determine the weighted-average unit contribution margin. (Round answer to 2 decimal places, e.g. 10.25.) Weighted-average unit contribution margin LINK TO TEXT

Explanation / Answer

SOLUTION

(A) Sales mix as a function of units sold -

Basic - 720 / 1,200 = 60%

Basic Plus- 300 / 1,200 = 25%

Premium - 180 / 1,200 = 15%

(B) Weighted-average unit contribution margin-

Contribution margin = Selling price - Variable costs

Basic - $249 - $190 = $59

Basic Plus- $402 - $288 = $114

Premium - $804 - $411 = $393

Weighted-average unit contribution margin =

= [($59 * 720) + ($114 * 300) + ($393 * 180)] / 1,200

= $147,420 / 1,200

= $122.85

(C) Break even point in units = Fixed costs / Contribution margin

= $184,275 /  $122.85 = 1,500 units

(D) Basic = 1,500 * 60% = 900 units

Basic Plus = 1,500 * 25% = 375 units

Premium = 1,500 * 15% = 225 units

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