Break-Even Sales and Cost-Volume-Profit Chart

For the coming year, Cleves Company anticipates a unit selling price of $92, a unit variable cost of $46, and fixed costs of $230,000.

Required:

1. Compute the anticipated break-even sales in units. ____units

2. Compute the sales (units) required to realize income from operations of $92,000. ___ units

3. Construct a cost-volume-profit chart, assuming maximum sales of 10,000 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.

$644,000	Profit
$579,600	Profit
$460,000	Break-even
$349,600	Loss
$276,000	Loss

4. Determine the probable income (loss) from operations if sales total 8,000 units. If required, use the minus sign to indicate a loss. $___ Income

Sales Mix and Break-Even Sales

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:

Products	Unit Selling Price		Unit Variable Cost		Sales Mix
Laptops	$1,600		$800		40%
Tablets	900		450		60%

The estimated fixed costs for the current year are $3,894,000.

Required:

1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. ____ units

2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year.

Laptops	____ units
Tablets	_____ units

3. Assume that the sales mix was 60% laptops and 40% tablets. Compare the breakeven point with that in part (1). Why is it so different? ____units

The break-even point is lower in this scenario than in part (1) because the sales mix is weighted more heavily toward the product with the higher contribution margin per unit of product.