question archive Dragon Sports Inc
Subject:AccountingPrice:3.88 Bought6
Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $620,000, and the sales mix is 40% bats and 60% gloves. The unit selling price and the unit variable cost for each product are as follows:
Products | Unit Selling Price | Unit Variable Cost |
---|---|---|
Bats | $90 | $50 |
Gloves | $105 | $65 |
a. Compute the break-even sales (units) for both products combined. Units _____
b. How many units of each product, baseball bats and baseball gloves, would be sold at the break-even point?
Baseball bats _____ units
Baseball gloves _____ units
a. Compute the break-even sales (units) for both products combined.
In order to calculate the break-even sales (units) for both products combined we will need to apply the following formula:
Fixed Costs / (Sales Price - Variable Costs) = Breakeven Point in Units
In this example, the sales price less variable costs is $40 for both types of product:
Bats: $90 sales price - $50 variable costs = $40
Gloves: $105 sales price - $65 variable costs = $40
We will use the variable costs for bats to calculate the overall break-even point for units:
$620,000 fixed costs / ($90 sales price - $50 variable costs) = 15,500 units
b. How many units of each product, baseball bats and baseball gloves, would be sold at the break-even point?
In order to calculate the break-even sales (units) for both products combined we will need to apply the following formula to each product. We must also apply the expected sales percentage of each product to the fixed costs so that the costs are properly allocated.
(Sales % of Product x Fixed Costs) / (Price - Variable Costs) = Breakeven Point in Units
Bats:(40% x $620,000 Total Fixed Costs) / ($90 Sales Price Bats - $50 Variable Price Bats) = 6,200 bats
Gloves: (60% x $620,000 Total Fixed Costs) / ($105 Sales Price Bats - $65 Variable Price Bats) = 9,300 gloves