Determining the break even point and margin of saftey for a company with multiple products

151 Analysis of Cost, Volume and Pricing to Increase Profitability Problem 3-25B Determining the break-even point and margin of safety for a LO 3-6 company with multiple products Executive officers of Roth Company have prepared the annual budgets for its two products, Washer and Dryer, as follows: Washer Dryer Total Per Budgeted Quantity Per Unit Budgeted Amount Budgeted Quantity Budgeted Amount Budgeted Quantity Budgeted Amount Unit Sales Variable cost Contribution margin Fixed costs Net income 500 500 500 @ $540 @ 300 @ 240 = = = $ 270,000 (150,000) 120,000 (50,000) $ 70,000 2,000 2,000 2,000 $300 @ 180 @ 120 = = = $600,000 (360,000) 240,000 (94,000) $ 146,000 2,500 2,500 2,500 $ 870,000 (510,000 360,000 (144,000) $ 216,000 Required a. Based on the number of units budgeted to be sold, determine the relative sales mix between the two products. b. Determine the weighted average contribution margin per unit. c. Calculate the break-even point in total number of units. d. Determine the number of units of each product Roth must sell to break even. e. Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined products. f. Determine the margin of safety based on the combined sales of the two products