The Wharton Company retails two products, a standard and a deluxe version of a luggage carrier. The budgeted income statement is as follows:

Standard Carrier

Deluxe Carrier

Total

Units sold

176,000

44,000

220,000

Revenues at $20 and $37 per unit

$3,520,000

$1,628,000

$5,148,000

Variable costs at $15 and $17 per unit

2,640,000

748,000

3,388,000

Contribution margin at $5 and $20 per unit

$880,000

$880,000

1,760,000

Fixed costs

1,200,000

Operating income

$560,000

Requirements

1.	Compute the breakeven point in units, assuming that the planned revenue mix is maintained.
2.	Compute the breakeven point in units (a) if only standard carriers are sold and (b) if only deluxe carriers are sold.
3.	Suppose 220,000 units are sold, but only 22,000 of them are deluxe. Compute the operating income. Compute the breakeven point if these relationships persist in the next period. Compare your answers with the original plans and the answer in requirement 1. What is the major lesson of this problem?

Requirement 1. Compute the breakeven point in units, assuming that the planned sales mix is attained.

Begin by determining the sales mix. For every

1

deluxe unit(s) sold

nothing

standard units are sold.