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Problem 4-20 Sales Mix; Multi-Product Break-Even Analysis [LO9] Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells
Problem 4-20 Sales Mix; Multi-Product Break-Even Analysis [LO9] Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells three products-sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows: Units Percentage Sinks 1,000 50% Mirrors 500 25% Vanities 500 25% Total 2,000 100% Percentage of total sales Sinks 48% Product Mirrors 20% Sales $360,000 100.00% Variable expenses Contribution margin 74,000 20.56% $286,000 79.44% $150,000 62,000 $ 88,000 100.00% 41.33% 58.67% Contribution margin per unit $ 286.00 $ 176.00 Vanities 32% $240,000 100.00% 86,000 35.83% $154,000 64.17% $ 308.00 Fixed expenses Operating income Total 100% $750,000 100.00% 192,150 25.62% 557,850 74.38% 516,450 $ 41,400 Break-even point in sales dollars Fixed expenses Overall CM ratio $516,450 0.74 = $694,339.88 Break-even point in unit sales: Total Fixed expenses Weighted-average CM per unit $516,450 $264.00* = 1,956.25 units *($286.00 x 0.50) + ($176.00 x 0.25) + ($308.00 x 0.25) As shown by these data, operating income is budgeted at $41,400 for the month, break-even sales dollars at $694,339.88, and break- even unit sales at 1,956.25.
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